Bruce Hinman: Who really pays for a tariff?

May 14, 2019

Editor: I thought that a Republican administration would be opposed to new taxes being imposed upon the American public, but I guess I was wrong. The tariffs imposed on foreign imports are, in actuality, a new tax imposed upon the buying American public. Here is how an import tariff works. When the United States imposes a tariff, that tariff is a border tax on the buyer, not the foreign seller. The US importer must pay the tariff (tax) to the US Customs Service before the goods are released to the importer at the US border. As a result, a tariff makes it more expensive for the buyer to import those goods into our country. So who benefits from a tariff? The US Treasury will see a windfall in revenue as tariff imports enter our domestic market. Who loses? Since it is unlikely the importer will be able to fully absorb the cost increase of the imported goods due to the tariff, those costs will be passed onto the consumer, you, the buying American public. Your cost of living will most likely increase. Some say that the American rust belt will resurrect itself and we will start producing many of those tariff products and manufacturing components domestically. That’s a tall expensive challenge for many of our older industries that are relatively antiquated or even now nonexistent compared to today’s foreign industrial world. In many cases, the rekindling startup of older obsolete industrial plants will require extensive time and new capital to be worldly competitive. That capital will expect a long term reliable return on its investment. Once we have upgraded so many old manufacturing restarts, what will happen when, some day, those protective tariffs are eliminated and we, once again, face competing with foreign costs and competition? If those protective tariff walls fall, will we be competitive in the world market place or will less expensive new competitive imports prevail and imports resume?

Bruce Hinman

Lake Havasu City