How Border Tariffs Affect Businesses

Judge Napolitano, the former New Jersey Supreme Court Judge, and frequent Television News Analyst is asked his opinion about a lot of subjects. One of these opinions has to do with his views about border tariffs. And if you have been following Napolitano for any length of time, you;v probably guess that he is not in favor of border tariffs.

Why? Tariffs, in theory, protect U.S manufacturers and companies from unfair trade policies such as China. As a consequence, so goes the theory, as the price rises on the cost of goods from foreign manufacturers, they will buy American.

As Judge Napolitano is aware, the problem is that tariffs don’t take into account that in today’s manufacturing economy, the vast majority of products are hybrids. Yes, they may have many parts made in Taiwan or Indonesia, but ultimately, they may be assembled in the USA.

In fact, in a 2019 Fortune Magazine article entitled, “Your American Car is probably not as American as you think,” it was revealed that only about 55 percent of the Average American manufactured car was actually from the U.S.

Those companies that are strictly American, through and through? Well, the judge points out that tariffs actually weaken many companies through their protection. They become lazy and may have lost their zeal for innovation.

Are Tariffs Popular with American Consumers?

Not at all. The U.S. Chamber of Commerce reports that over two-thirds of Americans are unanimously in favor of free trade, without any tariffs.

And whether they are aware of the numbers (that 25 percent of all imports are raw materials and 45 percent are parts,) Americans instinctively understand that a free-flowing trade market is what operates best.

Americans, again without focusing on the numbers, also realize that we export up to 25 percent of all of our food products.

And it’s been true for many years. When we impose tariffs, other countries in turn add retaliatory tariffs. In fact, according to Investopedia, there is substantial evidence to suggest that The Smoot-Hawley Tariff Act of 1930 substantially worsened the great depression.

Using Tariffs as Political Threats

Another reason that tariffs have proved to be unpopular is that various presidents have used tariffs as a way to further their political agenda. For example, President Trump threatened to add a 5 percent tariff for all goods from Mexico if Mexico didn’t substantially reduce the number of people trying to come to the United States illegally.

In a similar fashion, countries have been threatened by tariffs if they don’t find a way to reduce their impact on global warming. Political agendas should not be a reason to add a tariff to goods. Ultimately, the free market is a much better judge of whether tariffs make sense or not.

Even if they are put in place to protect vital US industries such as steel, ultimately the free market and not tariffs are the better way. Tariffs hurt the consumer more than they help them, and consumers are voters.

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