The fundamental laws of a free economy state that the supply must meet the demand to find the point of equilibrium in a society. The Office of the United States Trade Representative says that America is the world’s largest importer of foreign goods and the largest exporter of goods. Imported goods can account for 15.59% of our gross domestic product. President Donald Trump’s choice to impose tariffs on foreign goods could easily be the cause of the next U.S. recession due to one fact: tariffs cause inflation of prices. In turn, inflation can lead to mass unemployment, recession, poor markets, and limited economic growth.
Throughout history, this is easily exemplified by events like the Great Depression. There are three main causes that are generally attributed to the start of the Great Depression: the stock market crash of 1929, the failure of the American bank system, and the Smoot-Hawley Tariff of 1930. The Smoot-Hawley Tariff of 1930 was a tax placed on imported goods to the United States to protect specifically struggling fields like agriculture and business. This tax ended up making the Great Depression worse by doing the same thing Trump is doing now. According to taxfoundation.org, “Trump’s reliance on import tariffs to offset the cost of tax cuts comes with major downsides.” While Trump’s import taxes are undoubtedly going to hurt the economy, import taxes aren’t necessarily bad in themselves. The main goal of tariffs is to boost economic growth by building up from the inside—the opposite of what many would expect. By utilizing import fees, governments can encourage businesses and people who use international trade to purchase from within their own country to boost the growth of non-foreign businesses. Unfortunately, without publicly encouraging businesses to do so, they will, in turn, continue buying from foreign companies and raise the prices for their consumers to turn a profit.
Until April 2, the tariffs will be relatively unclear as to how much and on what products. Although Trump’s delays and cuts on the recently introduced tariffs complicate the matter severely, Canada and Mexico still face a 25% tax on a multitude of products. Moreover, Trump threatened to enact a 250% tax on dairy products for Canada, recently increased taxes on Canadian steel to 50%, and has stated that the tariffs could increase as the year continues. The recent steel tax on Canada was in response to Canada’s response to American tariffs by raising energy exports to America by 25%.
A main point of Trump’s campaign has been promised tax cuts for all Americans. In imposing tariffs that are so high, he’s ultimately costing Americans more in taxes. While tax cuts would be great for every American who’s part of the working class, they could do more harm to the government than good for the people. Taxes on the American people are instituted for a reason, and although they’re a negative aspect of day-to-day life, they have been and continue to be a necessary evil for all functioning economies in history.
Overall, the tax plans Trump has set for the next few years are poorly planned and need work to function the way they should to fulfill his promises.
