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On April 9th, Trump’s high tariffs on Chinese goods rose again to 145%, leaving economists and financial markets scrambling. But first, let us go back in time and see why this occurred.
Tariffs are taxes on goods imported from other countries, usually presented as a percentage of the product’s original value. Since April 2nd, also known as “Liberation Day”, Trump has imposed a minimum 10% tariff on nearly 60 countries, including some whose share of US imports is negligible, with subsequent increases. The countries the president described as the “worst offenders” were targeted with higher tariffs, such as China and Vietnam, and were not limited to products. He recently announced additional 100% tariffs on international films to save a “dying” Hollywood. However, all but China’s tariffs were suspended for 90 days almost immediately, although higher tariffs were initially scheduled to come into effect.
Although many countries have tariffs, none have seen such a significant shift. Trump’s goal is to encourage US consumers to buy from companies within the U.S. As a result, he increases the tax and promotes an economic boom through investment within the country, building a more self-sustaining economy. However, a tax increase could raise federal revenue and reduce national debt.
As part of his “Make America Great Again” scheme, he additionally claims that the US has been taken advantage of by “cheaters” and has been “pillaged”. Accordingly, Trump states that he is hopeful this plan will lessen the disparity between the amount of goods the US purchases from other nations and the value of those it sells to them.
Yet, this plan still has its flaws. America imports around $3 trillion worth of goods and raises around the same from income taxes per year, meaning that 10% tariffs would have a relatively insignificant impact. A CNN study found that to have any significant change, tariffs would need to be at least 100% on all goods.
To some extent, history may repeat itself. This situation could be seen as concerningly similar to an act that exacerbated the conditions of the Great Depression: the Smoot-Hawley Tariff Act, where President Hoover imposed steep tariffs on foreign goods to boost the national economy during the economic recession, with similar goals to Trump. In response, Canada, among other nations, retaliated by increasing their tariffs, much like China is doing now with a 125% tariff rate on US goods, and as a result, global trade ground to a halt, further worsening the economy. After stocks plummeted, Trump declined to say that his policies would prevent the US from entering a recession. Economists, therefore, anticipate that more repercussions will unfold in the near future.