Tariffs 101: Is raising tariffs on China a win for Americans?

Simone Del Rosario:

Biden and Trump agree on something? That appears to be the case with tariffs on China. Both believe it’s a winning issue in key battleground states. 

Four years ago, Joe Biden said Trump was going after China in the wrong way. But since becoming president, he has not only kept Trump’s tariffs in place, he’s adding on some of his own, on Chinese EVs, solar cells, advanced batteries, semiconductors, and aluminum and steel. Trump also wants to escalate his tariff policies if elected in November. 

I want to bring in Kyla Scanlon, an economic commentator and author of “In This Economy? How Money & Markets Really Work.” And Kyla, I want to talk about how tariffs really work. What do Biden and Trump think these tariffs will achieve versus what really happens when we increase tariffs on foreign trade partners? 

Kyla Scanlon: Tariffs are tough, right? So a tax on imports here, specifically it would be on China, and right now it’s definitely a political talking point, like everybody wants to see friendshoring, reshoring, and that’s why these tariffs are being positioned as such and being talked about right now, and I think people are hoping that it’ll achieve electoral votes, political points, but yeah, it’s tough, because it’s normally the US consumer does end up paying the cost for these tariffs in the long run, because they make everything more expensive to consume.

Simone Del Rosario: Are tariffs a proven way to protect the American manufacturing sector. And I, I’m going to ask a second one to this, is that, is the America’s manufacturing sector robust enough to be able to benefit from this?

Kyla Scanlon: It’s a good question. Detroit has seen a slowdown in clean energy production and electrification. You know, you’ve seen an uptick in dirty energy, as they call it. We don’t import a lot of solar cells and EVS from China, but it’s something that we’re relying on more and more, and that’s why the tariffs that Biden is imposing are a little bit more strenuous, and we are relying on it more. So it is going to be more economically impactful. It’ll just take time. It’s not a lot of money, like, it’s about $18 billion worth, against 8% of total exposed volume that the tariffs end up amounting to. So it’s like, not a lot of stuff. And it’s unsure if China will retaliate, yet they’re not very happy about it. But there’s definitely going to be an economic cost to doing this. The Clean Energy fight is super important, and we kind of have to do everything that we can and getting into a political war about it is not always so useful, right? 

Simone Del Rosario: You said that the American consumer ends up paying for this. We’ve already shouldered so much in goods inflations over the past couple of years. How might increased tariffs affect the current inflation rate?

Kyla Scanlon: Yeah, I mean reshoring is inflationary, inherently right, because it is cheaper to import certain things. Comparative Advantage is a real economic concept. So I think that’s the big worry with things like this, is that we are reliant on some aspects of pulling technology from other countries, and if we try to produce everything ourselves, that’s going to be expensive. It’s going to be expensive in building the manufacturing plants and hiring the labor and training up the labor, and, you know, we have the inflation Reduction Act, but even with that, it’s still going to be probably a meaningful cost.

Simone Del Rosario: Because you are someone who takes what’s going on in the economy and tries to really break it down for people to understand. I’m curious why these politicians, again, think that tariffs are a winning issue. What do you think the messages to Americans when we increase tariffs on places like China and, you know, versus what’s actually happening? Where’s the disconnect here?

Kyla Scanlon: Yeah, it’s a framing thing. President Biden tweeted out that he was going part of his housing plan was to give people $400 per month for like, two years so they could purchase their first home or contribute money towards their first home. And that’s like, not a great way to talk about housing policy, like, we really have to build more homes. But if you’re framing it from a political perspective, people do like the idea of getting $400 per month, but if you’re like, we’re gonna build 100 more homes, sometimes that doesn’t fly as well, and so tariffs are ultimately that sort of thing, like they’re ultimately a framing tool, and that’s why it’s been implemented. And why they’re talked about is because it is like, Okay, we’re going to go up against China. Who has? We have outsourced a lot of manufacturing to China. We have outsourced a lot of work to China. And now with worries around AI just, you know, is the economy actually slowing? The more that you can politically position to be like we’re bringing everything back here, the better.

Simone Del Rosario: Kyla Scanlon, author of “In This Economy?” That’s available for pre order now. Thank you so much, Kyla.