Tariffs have costly consequences for consumers

The Gilded Age’s tariff-dominated economy ended in 1909 when the 16th amendment to the U.S. Constitution adopted the income tax as the main source of federal revenue — and for good reason.

Tariffs are a tax on imports, operating like a sales tax wearing a mediocre disguise, and can burden Americans with modest incomes at a disproportionately greater rate. The tax is paid by U.S. businesses that import the products, and often are passed along to U.S. consumers.

While campaigning as the Democratic nominee for president in 1896, William Jennings Bryan would hold up clothing and kitchen utensils at rallies, railing against protective tariffs that drove up prices by 50%. Today, Tiffany Zarfas Williams has seen prices for inventory at The Luggage Shop of Lubbock rise by more than 80% due to Section 301 China tariffs.

“As a small, independent retailer, I had no choice but to raise my prices to keep up with what I’m being charged by my luggage manufacturers,” says Zarfas Williams, who is a third-generation owner of the Texas business.

Since 2018, broad tariffs on Chinese imports have been implemented and expanded upon by two presidents. Both the Trump and Biden administrations intended for the levies to address China’s trade practices with the hope of returning factory jobs to the United States; instead, the tariffs have forced American small business owners to choose between raising their prices or relying on already slim profit margins to absorb the increased cost of inventory.

For example, a suitcase Zarfas Williams could sell for $100 before the tariffs went into effect now sells for $160. The carry-on that used to cost $425? It now sells for $700.

But tariffs have more than a monetary cost — decisions to invest and expand are being impacted, too. Easy Signs, a manufacturer of banners and marketing installations in Allentown, Pa., has been growing by 70% each year. It chose to forgo an expansion, however, because the business relies on aluminum product display stands made in China that are now subject to a series of tariffs reaching as high as 365%.

And the cost to import goods could get even higher should former President Trump’s proposed 10% tariff on all imports and a tariff of 60% or more on all Chinese goods actualize. The Peterson Institute for International Economics estimates the combined effect of these tariffs would cost a middle-income household at least $1,700 in increased expenses each year.

That figure does not account for retaliation by our trade partners, but the Tax Foundation estimates that China’s retaliatory tariffs to Section 301 had a price tag of nearly $11.6 billion. To date, U.S. Customs and Border Protection has collected over $221 billion from U.S. importers for the Section 301 China tariffs.

“Despite these headwinds,” Zarfas Williams says, she wants retailers “to continue using our voices and push for a China trade strategy that protects American consumers and small businesses.”

The litmus test for such a policy, according to Bryan, relies on whether the policy is right and wise, and whether the tax is truly necessary. With study after study showing that the tariffs resulted in higher prices for American consumers and manufacturers, reduced American exports for goods that were subjected to retaliation, and further complicate an already stressed supply chain, the answer should be obvious.