Will Trump’s New Taxes Close the Trade Deficit? Not Exactly, but Rather How to Get the American Economy to Close It
The formula depends on the assumption of how much tariffs will raise prices. Only a fraction of the tariffs will be passed onto consumers in the form of higher prices, according to Trump’s math. But economists who have studied Trump’s tariffs in 2018 — on steel and aluminum and various products from China — calculate that almost all of those tariffs ended up being passed onto Americans.
This is contrary to Trump’s public statements, where he has denied that tariffs will raise prices or said that he “Couldn’t care less”.
Take China as an example. Last year, Americans imported about $439 billion of products from China — chiefly electronics, clothing, and machinery — while exporting only $144 billion. According to this formula, a 67% tax on those Chinese products should correct this trade imbalance. (On Wednesday Trump announced that the actual tariff would only be half of that, or 34%.)
Behind these Greek letters, there’s an understandable approach. The equation is looking at how much tariffs to set in order to get the Americans to buy less foreign products and close the trade deficit. The higher the trade deficit, the higher tariffs should be on that country’s products.
The new tariffs are the highest taxes on foreign products America has seen in generations, the administration disclosed on Wednesday night. (For a sense of that era, listen to the Planet Money episode on the Smoot-Hawley tariffs.)
These tariffs aren’t reciprocal. But the math behind them is not wholly invented or nonsensical, despite what some online have claimed.
Will the trade deficit be closed by Trump’s new tariffs? Maybe, maybe not. It has been a long time since the administration has shown its work. They calculated that the tariffs are designed to increase prices and close the trade deficit.
Trump ignores the broader economic consequences of the tariffs. They will affect the economy as a whole. They will influence exchange rates. They will likely get retaliated against by other countries.
How Much Does This Phone Cost? The US Smartphone Market in a Tough Spot: Trump’s Tariffs Put the iPhone in the Decline
is a reviewer with 10 years of experience writing about consumer tech. She is interested in telecom and mobile photography. Previously, she worked at DPReview.
The US market for phones is not normal. Answering the question “How much does this phone cost?” can often require a little math, because most of us buy our phones through a combination of installments, trade-ins, and carrier deals. The April 9thst tariffs on Chinese goods will make things even more complicated. Will the extra cost of an phone be passed along to buyers? The market thinks so. It’s likely why Apple’s shares are down almost 10 percent, the worst drop in about five years.
There are extra taxes to be dealt with in order to bring them to the US from overseas. Apple is a good company to try to get the supply chain to absorb some of that additional cost, which is something that they are good at anyways. And if Apple raises prices with the iPhone 17 series, our tendency to buy phones through carrier subsidies could cushion the blow through slightly higher monthly payments.
Source: Trump’s tariffs put the iPhone in a tough spot
Remarks on the tariffs and their recurrence with the PAMELA monitoring system, Part I: The unambiguous case
There is still uncertainty around the tariffs, including the possibility that they might get pushed back again. It’s complicated, like I said.