Our government has been on a campaign to ‘protect American jobs’ by increasing tariffs on imported goods. Yet, the Wall Street Journal reports that our trade deficit with China is increasing not decreasing in the early months of 2021. In March our imports from China surged 19% while our exports to China rose only 8.6%. There is a huge backload of full container ships sitting at the port of Los Angeles and Long Beach waiting to be unloaded. The flood of import products is far exceeding our infrastructure to move the products through to the customers. This is creating massive shortages in products across the country.
So, what is happening? Tariffs are greatly increasing the cost of imported products to the American public but not achieving their objective of moving production to the U.S. This means that all Americans, rich – middle class – and poor, are paying more for a huge portion of their consumer goods purchases. This is called inflation. So, we have the worst of both worlds — limited product availability and rapid price escalation.
While the government experts claim our rapid inflation is temporary, there are many forces that put that premise in question. Certainly, the inflation caused by tariffs does not seem to be temporary based on the strategies of our past or current political administrations. Both the Republican and Democratic leaders claim their interest is in the middle class. But – has the tradeoff of higher prices for new jobs really worked for these people? I think not.
What often happens when tariffs increase the cost of imported products, the domestic producers then increase their prices too. Therefore, the market share of import and domestic doesn’t change dramatically, but the customers pay more. Who is getting richer? It’s the tax collector.