Americans Want Affordable Goods, Healthy Economy & Safe Nation
U.S. trade policy has been at the epicenter of discussion in the nation’s capital, with broad universal tariffs at the core of the conversation. To assign some facts to the debate about the impact of across-the-board tariffs, particularly on consumers and small businesses, see the enclosed detailing who actually pays the price.
MYTH 1: Broad universal tariffs protect domestic industries and lead to higher wages for blue-collar workers by reducing competition and securing U.S. interests.
- FACT: Tariffs often result in higher prices for consumers. Everyday Americans, particularly those in the lower- and middle-income brackets, typically spend a larger portion of their income on everyday consumer goods, such as electronics, clothing, and food. When tariffs raise the price of these goods, it reduces the purchasing power of consumers, effectively putting less money in their pockets.
- For instance, the Tax Policy Center estimated that proposed tariffs could lower the average after-tax incomes of U.S. households by about $1,800 annually. Similarly, the Yale Budget Lab projected that consumer prices could rise by 1.4% to 5.1%, resulting in an additional cost of $1,900 to $7,600 per household.
MYTH 2: Tariffs are needed to safeguard blue-collar jobs and protect U.S. industries from foreign competition.
- FACT: Indiscriminate tariffs provoke retaliatory measures from trading partners, harming American industries, such as agriculture, technology and manufacturing. This ultimately harms the overall job market, including blue-collar workers in export-dependent industries.
- A study conducted in January 2024 by David Autor, co-director of the Labor Studies Program at Massachusetts Institute of Technology, and colleagues found the 2018 and 2019 tariffs did not deliver economic benefits to the heartland. According to their findings, import tariffs had “neither a sizable nor significant effect on U.S. employment in regions with newly protected sectors,” while foreign retaliation had a clear negative impact on employment, particularly in the agricultural sector.
MYTH 3: Tariffs create jobs by encouraging domestic manufacturing.
- FACT: The nonpartisan Congressional Budget Office (CBO) notes that tariffs can create inefficiencies in the economy by shielding industries from competition, which reduces the pressure to innovate or improve. This absence of innovation can lead to stagnation in wages and productivity, especially for blue-collar workers. Additionally, trade policies applied broadly may reduce the competitiveness of certain industries, ultimately restricting long-term job growth and wage improvements.
MYTH 4: The U.S. can simply shift to more domestic production with the implementation of non-strategic tariffs.
- FACT: Domestic industries often depend on foreign suppliers for key goods and components. Trade policies can disrupt supply chains, increase production costs, and cause inefficiencies, making it harder for businesses to stay competitive. A February 2020 paper from economists Kyle Handley, Fariha Kamal, and Ryan Monarch found that previous trade approaches were equivalent to a 2% tariff on all U.S. exports, leading to higher prices for consumers and fewer jobs.
MYTH 5: Broad universal tariffs will lead to more U.S. exports.
- FACT: With a focus on expanding U.S. exports, the implementation of trade policy can have an outsized impact. When the U.S. imposes tariffs on foreign goods, it often triggers retaliatory tariffs from those countries. For example U.S. automakers who depend on affordable steel or electronics components from other countries may face higher production costs due to retaliatory tariffs by allies, leading to higher prices for U.S.-made cars and a decreased demand for U.S. automobiles.
Understanding the true impact of universal tariffs is crucial for businesses and consumers alike. While they may seem like a protective measure, broad tariffs often lead to higher costs, job losses in key industries, and weakened economic growth. As trade policies continue to evolve, staying informed is essential for making strategic business decisions. For more insights on government issues affecting the home furnishings industry, visit HFA’s Advocacy Resources.
