There are many that are up in arms about President Trump’s proposal to place a tariff on goods imported from foreign countries that are from factories that moved from the United States. President Trump also plans to place tariffs on countries that use unfair trade practices such as currency manipulation.
There are many different ways to look at tariffs. I believe that President Trump’s position is that any tariff that his administration would recommend would level the playing field.
There are others that would look at the tariff as a punishment to the business or to the end customer.
Over the last fifty years the United States has had hundreds if not thousands of businesses move to foreign countries.
Why have so many companies moved operations to foreign lands? The answer to that question is very simple COSTS!
In the United States today we have three costs that are out of line with the rest of the world.
• First there is regulatory cost. The United States has placed so many regulations on businesses that the cost to apply and report these regulations now exceed the taxes that a company must pay.
• Secondly is the taxes that a business must pay. The tax rate for businesses and corporations in the United States is one of the highest in the world.
• Thirdly is labor cost. In the United States the minimum wage laws and labor union’s demand for higher wages has driven labor cost up in the US which now are not in line with most of the world! Because of regulation cost, taxes and labor cost in the US goods can be made in other parts of the world and shipped back to the US at a much lower cost than if they were made in the US.
If President Trump’s position is correct then the addition of a tariff would only bring the price of goods back to what it would be if it were made in the US.
The only problem with tariffs by the US is a tariff war! Tariffs by the US could lead to a tariff war with all countries placing tariffs on their goods to extract a penalty for the US placing tariffs on imports from their country. Tariffs correctly used along with corrections in regulations and taxes could cause many companies to return their manufacturing facilities to the United States!