Hard to imagine - but former President Trump has suggested additional retail tariffs that could eliminate the U.S. income tax. Certainly, many retailers would view this concept as a contorted twist of a tariff policy that has already raised prices, caused inflation, and disrupted supply chains. Funny, because this new idea is a tad reminiscent of former House Speaker Paul Ryan’s B.A.T. tax (which Trump never really liked). However, just placing his new “all tariff policy” in the public forum – clearly shows that the former President, if re-elected, would continue to weaponize tariffs as his tax-de-jour.
The Biden White House is countering Trumpian Trade efforts by saying that President Biden wakes up every day thinking about lowering the cost of retail items. Assuming this to be true (and that the President is not sleepwalking the concept) his efforts are a bit too little / too late. Visible efforts to improve America’s role in International Trade have been nonexistent under the Biden Administration. Biden’s IPEF has imploded, GSP and MTB have not been renewed, China is challenged, AGOA is floundering, and Haiti is drowning.
With few international places for importers to trade under beneficial terms, and with the UFLPA (along with tariffs) slowing imports from China, no wonder there is retail inflation. It’s just really hard to keep prices down. Senator John Thune (R-S.D.) recently indicated that prices are up 20% since President Biden took office.
Former President Trump has vowed to lower consumer costs, but economists (who study his policies) claim that his efforts will be even more inflationary than the ones we currently have and, if his new “all tariff policy” were to turn real……retail and USA exports will surely get hit really hard. Plus, the math on this is perplexing. The U.S. Government in 2023 raised roughly $2.6 trillion in personal and corporate income tax. At the same time, the USA imported about $3.8 trillion of goods and services, so the new tariff would have to be at least 68.4% if everything were to stay the same. However, retailers know that if prices go up, sales will go down and, jobs will get lost - with less income available to be taxed. In addition, those who export products would face tariff retaliation from abroad and export sales would fall.
Bottom line, both candidates say want to lower inflation and but both have announced policies that will only increase it. On top of all that, retail prices will remain high, as the measure of inflation is gauged by the rate of price increases, with few expecting much of a drop in the selling price.
At best, Americans can hope that retail prices will stabilize at these new highs; and then everyone can breathe a sigh of relief that the increases have slowed a bit. Based on current federal trade policies, goods will not get cheaper – unless there is a major recession - when the whole price equation just blows itself up, or the federal government is willing to change its trade agenda - which appears unlikely.
Economists continue to float creative terms in an effort to explain what we are going through from a consumer perspective - but putting a label on something doesn’t change federal policy. The Federal Reserve mis-read inflation in the beginning of President Biden’s term when they deemed it “transitory” only to later eliminate that word from their lexicon - to get a better grip on what ended up being a soft landing. Retailers, on the other hand, are America’s true economists as they deal with the reality of what consumers will or will not pay for products. In general, retailers are a very clever lot, and they will run sales to manage inventory or practice the art of shrinkflation - to make it look like you are getting more for less. But, at some point, even the best retailers the wall and run out of ways to lower the cost of product.
Former President Trump, in his re-election campaign, has put forth policies that are slated to raise cost, yet he consistently preaches that he will lower prices. At a January 29th rally in Las Vegas, the former President explained his version of inflation when he said: “remember this, gasoline, fuel oil, natural gas went up to a level that it was impossible…..That’s what caused inflation, and we’re going to bring it down because we’re going to drill, baby, drill. We drill, baby, drill. We’re bringing it way down.” Statements like that, of course, fly in the face of climate change activists who focus on the use of fossil fuels. On June 9th the former President at another Las Vegas rally (Sunset Park) also said “drill, baby, drill” – where, at a time, his faithful audience was under extreme heat, with 24 people requiring medical attention, and 6 people being taken to a hospital for treatment (according to the Clark County Fire Department).
The truth is that former President Trump originally wanted a better balance of trade with China, and to his credit, he used tariffs to force that change - which resulted in the (failed) U.S.- China Phase One Trade Agreement of 2020. It is unlikely that the tariffs were meant to last forever under former President Trump - but they were continued by President Biden – so it now seems like they are here to stay. Team Biden, for their part recently announced even more new tariffs - as they failed to eliminate the old ones following a mandatory four-year review (that took two years to complete).
It would seem, for the policy wonks among us, that Trump created the tariff problem; Biden enhanced it; and the future for international trade right now looks dismal. Because of all this, it is more-than- likely that higher prices will continue - because there is little retailers can do to lower cost.
Whether President Biden wins the election and continues on his current trade path, or former President Trump wins and touts his 10% import tax on every country (ring-around-the-collar), or his 60% import tax on China, or his “all tariff policy” to replace income tax –—- retailers will feel the pain and the American consumer will be stressed to the limit.
Putting all this in perspective, there was once a street vendor who sold imported white t-shirts on a corner near Times Square in New York City. In the beginning, he sold 5 white shirts for $10 - then switched to 3 for $10. The last time he was seen, the price was 1 shirt for $10.
Next year, unless something changes in the world of international trade, this street vendor will probably will be out of the shirt business and, searching for better luck in the world of retail, will likely be engaging pedestrians in a game of Three-card Monty.
"trade" - Google News
June 17, 2024 at 07:15AM
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Trump Wants To Flip Income Tax With Tariffs As Biden Sleepwalks Trade - Forbes
"trade" - Google News
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