Yes, a tariff is a tax. Period. You and I pay it. Any more questions?

            TIME FOR AN economics lesion.

            The word “tariff” has been on my mind the past few days. It is being bandied about it’s apparent that a lot of folks don’t know what that is. 

            Simply put, a tariff is a tax on imports. Historically tariffs have been used to protect domestic production and jobs, though given the realities of the 21^st Century global economy they really don’t accomplish those goals. Maybe in the 1800s when a young country was trying to create its own industrial base tariffs might have had a role to play, but not so much today.

            We are hearing talk these days of putting a “tax on China.” In other words, a tariff. China, it’s argued, will pay a premium to get its goods into the U.S. Well, no. China will continue to send its goods to the U.S., companies like Walmart will continue to buy them and you and I will pick them off the shelves, or not.

            The “or not” depends on what we want to pay. Here is how this will work.

            Walmart buys “Hotshot Gas Grills” from China.  A 10% tariff on a grill with a wholesale cost of $60 would add $6 to Walmart’s cost of importing that bike. Walmart could pay $3 of the $6 cost and pass half of it on to customers, whose price would rise by $3. In that case, Walmart profit shrinks and customers are left with a thinner wallet. Or Walmart could protect its margins and pass the entire cost on to consumers.

            YOU MIGHT ASK, if China paid a tariff on those gas grills, where did that money go? It went into the U.S. treasury where it is used for…well, whatever.

            So, does that mean a tariff never has a domestic advantage? No, it can. For instance tariff’s were imposed on vehicles years ago and as a result foreign manufacturers began building plants in the U.S. But, that stands out as a bit of a lonely success story. 

            It’s interesting to me that with so many voters saying the economy is their number one concern, hence their number one criterion for deciding who to vote for, that so few seem to really understand what constitutes an economy and who actually can control it. 

            In this instance, a tariff is a tax on you and me. Period. Economic lesson for the day concluded. You’re welcome.

                  Rich Heiland is a retired journalist and semi-retired consultant, trainer and public speaker. During his journalism career he was a reporter, editor, publisher, college instructor, part of a Pulitzer Prize-winning team and a National Newspaper Association Columnist of the Year honoree. He also writes the intodementia.com blog about his family’s experience with dementia. He lives in West Chester, PA and can be reached at [email protected].