President Trump postpones tariffs

On April 2, President Trump announced a series of tariffs that were categorized as “reciprocal.” These reciprocal tariffs ranged from 10 percent to 50 percent and were calculated by the administration for about 90 different nations across the world and because of this, the stock market began to fall drastically.

In a turn of events, on April 9, Trump backed away from these reciprocal tariffs.

Now, there is currently a 90-day pause on all reciprocal tariffs and the percentages for these tariffs were lowered to at or around 10 percent for all nations affected. The postponement of these tariffs helped the stock market rise again, but one country was exempt from this tariff pause. 

China is the only nation that was exempt from a lower tariff rate and instead, the tariff rate for China rose to 124 percent.

Trump released a statement on social media that stated, “Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the tariff charged to China by the United States of America to 124%, effective immediately.”

This statement came after China had already been hit with a tariff of 104 percent. So, why would Trump keep raising tariffs on China? Well, because China retaliated against Trump’s tariffs by placing their own on the United States. Essentially, the United States is in a tariff war with China.

Dr. Zhu, UCO’s Dr. Michael Metzger Chair Professor of Economics, broke down what a tariff war is, “When we impose tariffs, the foreign country is going to impose tariffs too. That’s why we call it a tariff war.”

A tariff war, like any other trade war, is an economic war. Dr. Zhu expressed that with any kind of war, economic or not, there will be casualties. The tariffs imposed on goods from other countries are going to cause prices to go up on those goods when they enter the United States. So, demand is naturally going to decrease. If demand decreases, then American importers will purchase less from foreign countries, and the same goes for foreign countries that will import less goods from the United States. This will cause domestic and foreign businesses to struggle and in turn, economies are going to start struggling tremendously. 

That also means American families and individuals are going to struggle financially and the United States could possibly end up in an economic recession that could lead to mass unemployment and layoffs.

So, with all the negative effects that a tariff war will eventually have on the United States, why would Trump continue with his tariff policies?

One reason is that Trump believes that American manufacturing is the best option when it comes to the American people buying goods. 

There is some truth to this. Increasing manufacturing in America will provide more manufacturing jobs, which have begun to decline drastically, because of high labor costs and other factors such as automation replacing workers.

While there is some good in American manufacturing, purchasing goods from American manufacturers is not always the best option.

Dr. Zhu elaborated on what could potentially happen in American manufacturing and how prices could be affected. 

“If we raise the price of foreign goods, so foreign cars for example. Originally the car cost $30,000, now a 100% tariff will just raise the car price to $60,000. That means that if you want to buy this car imported from a foreign country, you have to pay $60,000. That’s too much. So, Americans will buy a car produced in the United States for a lower price, but why would the American producers continue to charge $30,000 for the car?” 

They would not. If American manufacturers start to experience higher demand for goods because tariffs are causing foreign goods to be priced too high, then the American producer will also raise their prices.

Trump may want to return jobs to America and in theory lower prices, but the laws of supply and demand are not going to bend for the president.

“In addition, bringing manufacturing back to the States may not be

so easy due to supply chain issues, and, we better not hope for a large increase in jobs in the

manufacturing sector as nowadays robotics are replacing humans on the assembly lines,” said Dr. Zhu.

As of now, smart phones, computers and other electronics have been spared from China’s 124 percent tariff.