Ask Terry Questions Your Lesson on Tariffs

Your Lesson on Tariffs

By Terry Savage on August 17, 2018 | Wild Card

Yesterday on WGN radio, you explained the problems with tariffs. One thing leads to another that leads to another that leads to another etc. etc. Would you please repeat that here for me. I thought it was a terrific capsulation of why tariffs don’t work. Thank you!

Terry Says

OK, here goes:
In a misguided attempt to save American jobs, you put tariffs on foreign imports to encourage domestic production.
But importers don’t pay tariffs; consumers do! So the price of all that stuff goes up. Think of rising prices as inflation. When we have inflation two things happen:
— workers demand more money in wages to keep up with inflation, and interest rates rise because no one wants to lend money that will come back with less buying power because of inflation.

Now you have wages rising and interest rates rising. And we owe interest on a $21 trillion dollar national debt. So every percentage point in higher rates costs hundreds of billions in interest each year — digging a deeper debt hole for the nation. And leaving less for the federal government to spend on important stuff.

Meanwhile, many businesses that need imports to manufacture stuff can’t raise prices fast enough, so they slow down production and lay off workers.
And, at the same time, foreigners raise their OWN tariffs — meaning our stuff costs more over there, so they buy less of OUR stuff. And our workers are laid off because of slowign sales.

Tariffs are a big mess and no one ever wins a tariff war!!



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