Tyler Schipper, an associate professor of data analytics and economics at the University of St. Thomas College of Arts and Sciences, recently joined KARE 11 for a discussion about tariffs and how current and past presidents have implemented them, as well as their impact on consumers and the current elections.
Schipper said, in basic terms, consider that a tariff is a tax placed on American companies who want to import goods to the U.S. from another country. This tax is passed on to consumers through the retail prices they pay.
From the interview:
Regarding companies paying tariffs and the impact on consumers:
To the extent there are imported goods coming in, those prices from the tariffs are being passed on to consumers and if people aren’t buying those imported goods anymore then it’s this competition’s argument that you are buying the higher priced American goods. ...
Each step along the way there’s going to be a different calculus for firms about how much they pass (on to) the consumers versus how much they eat in terms of their own profits, but when you think about big picture, those are still all losses. So a firm that maybe is less profitable now maybe that shows up as your 401(k) not going up as much; maybe it means they have to lay people off now because their products are not as desirable and they’re not making as much money and it does show up in consumer prices as well.
Regarding a president’s option to unilaterally set certain tariffs without a vote from Congress:
The tariffs that we’re talking about here with both Trump and Biden, those were done unilaterally by the president and that’s not because that’s power granted them in the Constitution instead that’s because it’s power delegated from Congress. Congress wrote a law that for national security reasons we want to, for lack of a better word, deputize the president to make these decisions with the rationale that there might be situations where you want this decision to be made relatively rapidly and that Congress is not a body that’s known for rapid decisions in times of emergency.
Regarding recognizing that the U.S. has special relationships and allies that it doesn’t want to put tariffs on and some other countries where it does.
A lot of the tariffs on China … more recently they’ve actually been expanded to a bunch of other goods for national security reasons, whether that was solar panels, 100% tax on Chinese EVs, semiconductors, other technology, it’s seen as kind of necessary for the future of American industrialization and ability to compete with China on the global scale.
Regarding decisions to set high tariffs on certain products and low tariffs on others:
You’ll hear the protection argument used a lot more in the U.S. context that, for instance, with our steel tariffs that were imposed in 2018, that was a protection argument that steel coming from China was being unfairly – the word is dumped – or put on markets at artificially low prices to try and force American firms out (of business) so in order to insulate our domestic producers you put a tariff on Chinese steel. That was the argument and it was more about protecting rather than raising revenue. (Another reason) … you might want U.S. bridges to only be made with American steel because you have more control over their quality and that can be the argument for why that steel should exist in the U.S. (versus imported).
Regarding what economists think about tariffs:
About 95% to 98% of economists … we’re not fans of tariffs and that’s (based on) public polling from the University of Chicago, which polls top economists. But I think that there are arguments to be made when there are clear reasons why there are unfair labor practices. So imagine a situation where we know a specific good is being made in western China, for instance where there’s an oppressed weaker minority there, and if they’re being used as essentially slave labor and that’s making their goods coming from that region be artificially cheap we might be willing to pay higher prices as consumers to know that we’re not importing goods that were made (for cheap or cheaply) and we just need to be clear-eyed that there’s a trade-off there and that it is a trade-off borne by American consumers.
