Truth in advertising: Trump’s tariffs are taxes

If you’ve driven through Atlanta recently, then you may have come across a billboard or two that reads, “Tariffs are a tax.”

I generally don’t pay much mind to billboards. They are often just silly advertisements featuring personal injury attorneys attempting to out-macho their competitors. It is a bit juvenile, but the ones dealing with tariffs caught my attention. Given their simplicity and naked truth, they should snag yours too.

It turns out the Canadian government is funding the anti-tariff advertisements, and one Canadian official explained that this is “an educational campaign to inform Americans of the economic impacts of tariffs.” Yet it seems more than that. Canadians want to blunt President Donald J. Trump’s looming tariffs against their country, which may harm their economy, and this appears to be a way to influence public policy. The Canadians’ understandable—but self-serving—motives aside, they’re right; tariffs are a tax that Americans should be wary of.

Since storming back to power, Trump has proposed additional tariffs—taxes on internationally traded goods—on China as well as nearly all of America’s closest allies. He outlined his newest tariff proposal on April 2, which began to go into effect on April 5.

“Under Mr. Trump’s plan,” The New York Times explained, “the United States will impose a staggering new 34 percent tariff on Chinese goods, on top of the 10 percent levy applied to imports from around the world and the 20 percent levy he already imposed on Beijing. Some of Mr. Trump’s steepest rates apply to U.S. allies, including a 20 percent tariff on imports from the European Union and a 24 percent tariff on goods from Japan. India will face a 26 percent tariff on its exports to the United States.”

This is roiling financial markets and testing longstanding international friendships. Trump’s justification for these proposed tariffs differs by country, but include forcing foreign governments to limit illegal immigration, curtail the smuggling of fentanyl or simply to reorient so-called trade deficits. Whatever the reason for them, they are poised to hurt Americans who are already feeling the pinch of an unsure economy.

Before announcing the latest package, the White House had been touting the supposed wonders of tariffs. “Tariffs are going to raise about $600 billion a year, about $6 trillion over a 10-year period,” Trump’s trade advisor Peter Navarro boasted. That may be true, but then Navarro made a laughable claim. “Tariffs are tax cuts,” he said. While I did not interview Navarro, if I did, my next question would have been, “Sir, what color is the sky on the planet where you’re from?” because he is somehow divorced from reality.

Just as the billboards claim, tariffs are taxes. When governments levy them on imported goods, the costs are subsequently baked into the retail costs of consumer products. So the tax is passed onto Americans, unless they choose to only buy tariff-free goods, which may be even more expensive. It’s generally a lose-lose situation for consumers who face inflated costs.

The Wall Street Journal didn’t mince words in response to Navarro’s claims: “By any definition that is a tax increase, and the $600 billion figure would be one of the largest in U.S. history. It amounts to about 2% of gross domestic product, and it would take the federal tax share of GDP above 19% […] Democrats, who love tax increases, haven’t dared pass such a large revenue heist.”

Despite this obvious truth, Trump is married to the notion of tariffs, and he is disregarding commonsense and solid research in the process. “The first Trump administration imposed tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019,” the Tax Foundation reported. “The second Trump administration tariffs now affect more than $1 trillion of imports, and when temporary exemptions for Canada and Mexico expire in April, the tariffs will affect more than $1.4 trillion of imports.”

“We estimate the 2018-2019 trade war tariffs imposed by Trump and retained by Biden reduce long-run GDP by 0.2 percent […] and employment by 142,000 full-time equivalent jobs.” That is a terrible return on investment, and with every tariff Trump levies, Americans may face additional tariffs from affected countries, which is a bit like being double-taxed. Plus his constantly changing tariff declarations add uncertainty to the markets.

I am not an anti-tariff purist. There are specific cases in which they can make sense, particularly when imposed on America’s enemies, but I generally prefer free trade. However, Trump’s strategy seems to primarily hammer our allies with tariffs and let Americans feel the pain. After years of dealing with inflation under former President Joe Biden, we may now be treated to manufactured inflation in the form of taxes, but don’t take it from me; read Atlanta’s billboards.