Cut Tariffs for Working Americans
It’s time for Congress to lift the tariff burdens that failed trade wars are placing on U.S. consumers — and to enact tariff cuts for working Americans.
by Ed Gerwin, Senior Fellow for Trade and Global Opportunity at the Progressive Policy Institute
President Trump has repeatedly claimed that foreigners foot the bill for his mounting tariffs. In fact — while U.S. tariffs discourage trade from China and elsewhere — tariffs are taxes paid by Americans. What’s more, tariffs are arbitrary and regressive taxes that hit lower- and middle-income Americans hardest.
It’s time for Congress to lift the tariff burdens that failed trade wars are placing on U.S. consumers — and to enact tariff cuts for working Americans.
As a technical matter, U.S. importers pay tariffs when goods enter the United States. As a practical matter, virtually every American bears the cost of tariffs. Tariffs raise input costs for U.S. manufacturers, making their products more expensive. When costs increase, American workers lose jobs. And taxpayers pay when Trump provides billions in bailouts to farmers injured by foreign retaliation.
In an economy driven by consumer spending, much of the burden of tariffs ultimately falls on average Americans. Trump’s recently announced ten percent tariffs on $300 billion in imports from China covers a 142-page list, including appliances, baby products, computers, clothing, phones, and shoes. These new trade taxes would cost a typical family an estimated $350 annually, on top of the $850 in added costs from earlier China tariffs. Additionally, Trump’s tariffs on steel, aluminum, and lumber have significantly inflated home construction and remodeling costs, while his washing machine tariffs cost consumers $1.5 billion in 2018.
Other tariffs put added burdens on American families. Although U.S. baseline tariffs average only a few percent, America’s convoluted tariffs on clothing, footwear, and household items often exceed 30 percent. Like Trump’s China tariffs, these decades-old taxes are especially regressive, burdening middle- and lower-income consumers and, especially, families with children and single parent households. Perversely, these tariffs often tax mass market clothing and footwear at much higher rates than luxury goods. For example, importers pay a 32 percent tariff on low-end acrylic sweaters, but only 4 percent on cashmere sweaters. A 2017 study estimated that, overall, longstanding tariffs on consumer goods saddle consumers with $27 billion in higher costs annually.
After passing tax cuts that skewed heavily towards the rich, Congress should provide tax relief for working Americans by taming — and eliminating or reducing — regressive tariffs.
First, Congress must rein in the Trump Administration’s out-of-control use of Congressionally delegated tariff powers.
For Trump, more tariffs are the solution to every trade challenge. The President, however, has nothing to show for mounting trade taxes on Americans. He’s imposed 25 percent tariffs on $250 billion in imports from China to address legitimate concerns about China’s technology theft, and ordered tariffs on $300 billion more, including many consumer goods. China hasn’t budged but has, instead, retaliated.
And Trump apparently hasn’t learned. There’s concern he’ll double down on failed tariffs by ordering 25 percent “national security” duties on imported cars and parts. These taxes on American drivers would increase the price of a $30,000 imported car by an estimated $6,400, while inflating the cost of U.S.-built and used vehicles.
To protect consumers and the economy, Congress should enact broad legislation to require the President to provide detailed justification for tariffs, mandate independent analysis of tariff impacts, and provide an effective procedure for Congress to overturn or prevent damaging tariffs.
Second, Congress should root out decades-old regressive tariffs on clothing, shoes, and household items. A comprehensive U.S. budget proposed by my colleagues at the Progressive Policy Institute, for example, would entirely eliminate U.S. tariffs on clothing and footwear. In 2017, these items made up only 6 percent of U.S. imports but, because of high tariffs, accounted for over half of the $35 billion in duties collected that year.
Third, Congress could provide tariff relief for consumers by making clothing and footwear eligible for the Generalized System of Preferences, which provides duty-free treatment for certain items from the world’s poorest countries. Duty-free clothing and footwear under GSP could help lessen tax burdens that Americans face from both long-established and China-specific tariffs. And, because China isn’t a GSP country, expanding GSP could pressure China by aiding its competitors, while helping American consumers.
Donald Trump says that, like Scrooge McDuck, America is swimming in tariff revenue. In fact, even with recent increases, tariffs provide only two percent of federal revenues. Tariffs are, however, regressive taxes that burden ordinary Americans. As it seeks to support working Americans, Congress should cut their taxes by reducing burdensome tariffs.
