Letter to the Editor: Submitted by Ann Fields
To the Editor:
According to Wikipedia, “a tariff or import tax is a duty imposed by a national government… and is paid by the importer.”
Seems pretty straightforward. Who is an importer? The importer is a business or a person in a foreign country who wants to sell goods or services to a business or someone in the United States. The business or person who is buying the good or service is the customer.
Let’s have an example. Right now, the U.S. tariff on Chinese goods is 57.6%.
Walmart wants to buy a television from a Chinese business for $100. The Chinese business (the importer) declares to the custom’s office the $100 cost of the TV and is charged $57.60, the goi ng tariff rate. The Chinese business now has three options:
1. Pass all of the tariff on to Walmart, charging them $157.60 for the TV.
2. Not pass any of the tariff to the customer, and thus only netting $42.40 ($100 minus the tariff of $57.60).
3. Do a combination, “eat” part of the tariff and pass part on. In this example, the Chinese business only charges Walmart half of the tariff ($28.80) and has to absorb half of the tariff ($28.80).
Let’s examine the outcomes of each of the options above:
1. Walmart (the customer) is charged $157.60 for the TV. If Walmart wants to keep its profits the same, it has to increase the price of the TV by $57.60. Walmart has overhead costs to consider, including rent, salaries, utilities, insurance, trucking, profit, etc. In this example, in the past, Walmart paid $100 for the TV and added overhead of $300 and charged its customers $400. Now, Walmart must charge $457.60 (the original price of $400 plus the $57.60 for the tariff), an increase of over 14.4% of the original cost of the TV.
2. The Chinese company decided to not pass any of the tariff to Walmart and thus goes out of business because it cannot pay its employees and overhead. Or it might decide not to sell any TVs to Walmart and sell its TVs to India or the European Union. The Walmart customers would lose the opportunity to buy that brand of TV.
3. The combination of passing only part of the tariff onto Walmart, the extra $28.80, means that the TV would cost $428.80, almost 7.2% increase of the original price of the TV. The Chinese business could lower wages and benefits, thus hurting its employees to help offset the half-tariff it is “eating.”
In these examples, the outcomes for the U.S. customer are:
1. The U.S. customer pays 14.4% more for goods from China.
2. The U.S. customer doesn’t pay any more, but risks losing the opportunity to purchase the goods and services from China because Chinese businesses either go out of business or will find new customers whose governments don’t charge tariffs.
3. The U.S. customer pays almost 7.2% more for goods from China.
Who wins? In all three cases, the U.S. government wins, collecting the $57.60. But these funds do not go toward the budget. The budget that is approved by Congress pays for education, the military, Social Securty, Medicare, Medicaid, etc. So these tariff funds are put in a separate fund. Technically, these funds do not even go toward reducing the debt.
Who loses? The U.S. customer loses, paying more for goods and services (up to 14.4% more) or not having the opportunity to buy certain brand names. But they gain nothing from these funds because the funds do not go toward providing services.
Is this what we want? The U.S. consumer is paying more and getting nothing in return.
No, it’s not new taxes, but it is money from our pockets paid to the government. Don’t be fooled. The increased costs of goods and services due to tariffs comes from the U.S. citizens.
Ann Fields
Lansing
