The thing about tariffs is they’re just taxes by another name — and we know who ends up paying them.
We do.
President Trump’s imposition of new tariffs on Canada, Mexico, and China are in fact taxes imposed on manufacturing, small businesses and ultimately, Americans. Tariffs are sold as taxes on foreign nations, but they are no different than the taxes Americans pay when they make Social Security “contributions.”
It is expected that President Trump will announce and try to sell his new tariffs during the State of the Union speech this week.
Hopefully, it’s a tactic rather than a tax. A kind of short-term threat used as a bargaining tool that will be lifted when the Trump administration can announce progress on border security and stopping the tsunami of fentanyl into this country.
The threat of tariffs has worked recently — as when the government of Mexico agreed to help staunch the tsunami of illegal immigration at the Southern border. The threat prompted Mexican President Claudia Sheinbaum to put 10,000 soldiers on the Mexican side of the border.
The threat has also prompted several major car companies that have manufacturing operations in Mexico to publicly reconsider shifting production operations to America in order to avoid the cost-adding taxes — tariffs — that are being proposed. “From Mexico to the U.S., we are exporting a significant number of cars this fiscal year … and if the high tariffs are imposed, we need to be ready for this,” said Nissan’s CEO Makoto Uchida recently.
“Maybe we can transfer the production of these models elsewhere.”
GM, Ford, and Stellantis — which owns the Ram truck brand — also have extensive manufacturing operations on the wrong side of the border. Ford’s CEO, Jim Farley, has warned that the add-on cost of tariffs is certain to raise the costs of Ford trucks assembled in Mexico.
Actually, what he said was that Trump’s threat to impose a 25 percent tariff on American-brand vehicles made in Mexico — such as the best-selling F-150 pickup — will “blow a hole” in the U.S. auto industry.
Because, of course, Americans who are already paying a fortune for groceries (and 25 percent more for car insurance) can’t afford to pay 25 percent more for vehicles that have already increased in cost by about $15,000 versus four years ago.
There are better ways to insource manufacturing than to punish manufacturers — and thereby, Americans. President Trump would be better served to reduce and eliminate much of the regulatory compliance costs imposed on American manufacturers that have pushed manufacturing abroad.
It has become exorbitantly expensive to manufacture anything in this country. Vehicles are a case in point. Just painting a car is at least three times as expensive as it was 20 years ago because of compliance costs that require low-volatility paints and specialized spraying equipment.
Have you ever wondered why new cars — despite costing on average $50,000 — no longer have chrome plating but do have lots of cheap plastic that looks like chrome? It is because the cost of compliance with federal regs has driven chrome plating manufacturing out of the country.
OSHA workplace safety costs and emissions standards have also added thousands in costs to the price of cars. There are more hidden costs like air bags, remote back-up cameras, turbo-hybrid-direct-injected-engines and hiked insurance costs to repair and replace it all.
These costs are sold as necessary — to keep Americans “safe” (and the environment clean) but the truth is the regs are now more about compliance for the sake of compliance than for anything else. Vehicle exhaust emissions, for instance, are now almost entirely clean — in terms of there being almost nothing emanating from the tailpipes of new cars other than water vapor and the dread gas carbon dioxide that has nothing to do with pollution.
And “safety”?
That’s another bogey. Is a 2015 Mercedes S-Class sedan “unsafe”? Of course not. But it isn’t compliant with the very latest (2025) federal Motor Vehicle Safety Standards and so would be smeared as being “unsafe” by the federal regulatory apparat.
It’s a measure of how silly — and pernicious — things have become. And also why they have become so expensive.
Adding more expenses is not going to fix that.
The American economy is still dealing with a number of tariffs imposed by the prior administration. According to the Economist, in 2018-9, the federal government imposed tariffs on about $400 billion in imported goods with an average of the added cost of tariff taxes going from just under 3 percent to almost 14 percent.
John Murphy of the Chamber of Commerce argued in a piece calling for the reduction of tariffs in 2022, “the immediate effect of the 2018-2019 tariffs was to push the U.S. manufacturing sector into recession (it contracted by 1.3 percent in 2019) despite high consumer spending and an otherwise booming domestic economy. States such as Michigan, Wisconsin, and Pennsylvania saw net manufacturing job losses and blue collar wages fell nationally in 2019.”
This is evidence that existing tariffs need to be reduced, not increased.
It is regulations that need to be decreased — and by a lot more than just 25 percent.
Just last week, the president said he plans to cut the EPA’s payroll by 65 percent — which will mean fewer regulators and so fewer regulations.
That’s a start. Getting rid of those regulators will lead to vehicles becoming more affordable — as well as more of them being made here when manufacturers are rewarded rather than punished — and when it costs less to make things here rather than someplace like Mexico.
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