Shoppers Will Bear the Brunt of Trump's Tariffs

Donald Trump may consider tariff “the most beautiful word in the dictionary,” but voters might want to consider the impact his proposed tax increase on imports would have on their wallets and states’ economies.

Minnesota imported $42 billion of goods in 2023. Among its top trading partners are two of Trump’s favorite enemy targets — China and Mexico. The state is home to some of the world’s top food processing companies and depends on trade to market everything from snack foods to frozen entrees.

Walk into any Walmart. That inexpensive knit sweater you’ve been eyeing probably comes from China. The warm flannel? That’s from the Philippines. The car you’re driving has parts imported from Mexico. The gas you put in likely came from Canada; most of Minnesota’s crude oil comes through a Canadian pipeline.

Where the winters are long and the growing season short, consumers across the Upper Midwest rely on relatively inexpensive produce from other countries to fill the gap — raspberries, bananas, onions, and tomatoes.

Expect all these items to cost more if Trump imposes heavy tariffs and triggers a broad-scale trade war.

Trump would have Americans believe that tariffs will pay for all his promises to voters — from paying down the national debt to footing the bill for family child-care costs to wiping out taxes on tips, overtime and Social Security benefits.

Don’t believe it.

Economists know what Trump refuses to tell you: Foreign governments do not pay tariffs. They are not absorbed by companies who take the loss. The cost of tariffs, to the largest extent possible, is passed on to the US consumers who purchase the goods. The Peterson Institute for International Economics, a nonpartisan research group, has estimated the higher end of Trump’s proposed tariffs would cost the average American household $2,600 annually.

It’s not precisely what Vice President Kamala Harris has criticized as a national sales tax, but his ever-shifting pitch to impose tariffs of 10% to 20% — 60% or more for China — would have the same effect.

Worst of all, it would be a regressive tax with lower-income Americans paying a larger share of their income than the wealthy.

To understand the damage such tariffs might have on the economy, look no further than the tariffs Trump imposed in 2018. Targeted places included China, Canada, Mexico and the European Union. After imposing a 25% tariff on steel, Trump noted glibly in a social media post that “trade wars are good and easy to win.”

According to the USDA Economic Research Service, the resulting trade war and retaliatory tariffs led to a $27 billion drop in US exports. Among the collateral damage were farmers in Illinois, Iowa, Kansas and Minnesota, who had made up 63% of those sales.

“It was disastrous,” said Louis Johnston, an economist and professor at the College of St. Benedict and St. John’s University in Minnesota. The Trump administration spent $12 billion in relief to bail the farmers out, Johnston said, “but some of those sales never came back.”

Americans got hit twice — paying higher costs for goods and footing the bill for relief to farmers. The Farm Bureau reported that bankruptcies rose to their highest level in a decade in Kansas and Minnesota. Farm Bureau Chief Economist John Newton noted that while the bankruptcies resulted from several factors, among them was “the second year of retaliatory tariffs on many US agricultural products.”

As often happens in such cases, countries sought more stable, dependable trading partners. In the case of soybeans, for example, some of that business went to Brazil and never returned.

A Federal Reserve report in 2019 showed that “the 2018 tariffs are associated with relative reductions in manufacturing employment and relative increases in producer prices.”

The US and global economies have become so intertwined that it is impossible to separate the elements within a manufactured good. Even a bar of soap made in the US can have ingredients imported from many foreign nations.

Under the US-Canada-Mexico agreement, negotiated by Trump to replace the old North American Free Trade Agreement, automobiles crisscross the three countries an average of seven times, picking up parts before final assembly.

At a minimum, supply chains and ports of entry could face massive disruptions as an army of inspectors — which would be required for enforcement — attempted to determine which components were subject to tariffs.

A September analysis from North Dakota State University researchers showed that soybean exports could plummet 67% — more than $15 billion in a worst-case scenario based on Trump’s previous tariffs. China is a top market for US soybeans.

Trump has said that to avoid tariffs, foreign companies and US subsidiaries in other countries could simply relocate to the US and bring those jobs here.

But that, too, is far more complicated than it would seem and, at best, would result in a years-long, brutal realignment of markets and trade. In some instances, such relocation would be impossible. Crude oil fields are staying in Canada. Raspberries won’t grow in the US for much of the year. Companies that did relocate here would have to pay higher US wages, contend with labor shortages , and observe US regulations and standards — all of which could result in higher prices and inflation.

Presidents should consider tariffs a useful tool, applied strategically and sparingly, to protect American jobs and markets or for national security reasons. But attempting to turn back the clock and use them instead as broad revenue raisers is wrongheaded and bound to fail. That is no longer the world in which we live.

The most likely outcome of Trump’s proposal to underwrite massive tax cuts and other federal spending through tariffs would be massive market disruption on a global scale — one that would be very damaging to US consumers and businesses alike.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Patricia Lopez is a Bloomberg Opinion columnist covering politics and policy. She is a former member of the editorial board at the Minneapolis Star Tribune, where she also worked as a senior political editor and reporter.

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