Texas economist explains what a Donald Trump tariff plan would mean for state in 2025
Many Americans are still trying to understand how possible campaign promises made by President-elect Donald Trump following the election could impact them.
One of them was to improve the nation’s standing in international trade by imposing sweeping tariffs during his second term.
However, economists warn that carrying out that pledge might come at a significant cost to American workers.
Dennis Jansen, a professor of economics and director of the Private Enterprise Research Center at Texas A&M, explained to the Star-Telegram the possible implications of the proposed tariffs and how quickly Texans should expect to be affected.
What are Tariffs?
Tariffs are taxes imposed by one country on goods or services that come from another country.
Governments tend to use tariffs to protect domestic companies and raise revenue by increasing the cost of imported goods.
While tariffs can cause financial burdens for exporters, historically, consumers in the country where they are enforced bear the cost consequences.
For example, If a car manufacturer imports engines that are then used in vehicles, then tariffs on those imported engines will increase the production cost and the cost to the consumer.
How could Trump’s tariffs affect Americans?
Goods imported into the United States could be subject to a 10 to 20% tariff in 2025 under the Trump administration, according to some estimates.
Trump also suggested imposing an additional tariff of at least 60% on Chinese goods and, in the event that the border doesn’t close, between 25% and 100% on items imported from Mexico.
“To put that into perspective, the average tariff is much more like a couple of percent, like two; it’s nowhere near 10 or 20%,” Jansen said. “If you look at other developed countries like the European Union or Japan, their tariffs are very low, so this is a big thing.”
Jansen said if the U.S. imposes those kinds of tariffs, Americans can expect the prices of food and manufactured items to become more expensive.
He said another effect could be the start of a tariff war.
“If we impose a 10% tariff, other countries are going to have a hard time selling stuff to us because the prices are going to be higher, and people in the US are going to buy less,” he said. “So there’s a chance we could get into a tariff war which is us raising ours to 10%, and they raise theirs to 10%, the government revenue will go up, but international trade will decline.”
What kind of goods and services could tariffs affect?
Tariffs would raise the cost of gas, electronics, clothes, toys, and more, according to Erica York, a senior researcher at Tax Foundation.
A report released last month by the Consumer Technology Association suggests that the cost of smartphones might increase by 26% while the cost of laptops and tablets could increase by up to 46%.
How soon will Texans feel the impact of Tariffs?
Jansen said how soon Americans experience the effects of the Trump tariffs depends on how soon they get rolled out.
“The minute those tariffs are imposed, the importer has to pay a 10% price, so they’re gonna raise the price of those goods right away. The impact will happen quickly. I don’t think the tariffs are going to be imposed instantly, but when they do get imposed, the prices are going up,” he said.
While American manufacturers may benefit from the demand resulting from tariffs, Jansen believes it will ultimately hurt their productivity by making them rely on tariffs to help them with competition.
“They become a little less efficient because, yeah, you’re protecting your domestic industry, but the playing field isn’t leveled because Toyota has to charge 10% more for the same car if it’s made in Japan instead of the US.”
Jansen said the one way he sees tariffs benefiting the government is by helping it raise money.
“It’s a tax, and the government is running big deficits, so these tariffs will partially reduce those deficits. It’s not gonna reduce the deficits to zero or anything, but it will raise government revenue,“ he said.
This story was originally published November 19, 2024 at 4:22 PM.
