Steve Forbes writes in the latest issue of Forbes magazine about the damage tariffs inflict on the economy.
ONE THING TO always keep in mind about our trade battles is this: Tariff is another word for “sales tax.” When you hear of a 25% tariff on steel, translate that into a 25% sales tax on steel. That clarifies the issue. Hitting American businesses and consumers with a slew of new sales taxes on their products, materials and everyday items, such as kids’ clothes, hurts them. To say exporting countries will feel more pain than we do doesn’t negate the truth: We will also be hurt. If deals are not struck, our exporters–particularly farmers–will feel the sting of retaliation. So will our companies that have facilities overseas. How many Buicks or Apple products will be sold in China next year?
Another thing to keep in mind: Even if particular companies or industries aren’t directly involved in international trade, their prospects will be affected. They aren’t isolated from buyers, suppliers and financiers who are more directly involved. Don’t underestimate the ripple effect. Look at the 1930s. Most American enterprises weren’t exporters or importers, but almost all were hit hard when the Smoot-Hawley Tariff Act of 1929–30 ended up crippling the global trade and financial system and triggered a devastating economic contraction.
