Regardless of the outcome of Trump’s tariff wars
Yes, Trump’s massive tariffs are stupid, and nobody trusts him to stick to anything he says when it comes to trade because he’s always going to feel everything is “unfair”.
But here’s what many people out there are missing: at its core, the very baseline Trump tariff is 10%. And that’s not going away. Ever.
Many countries have a “consumption tax” or “Value Added Tax”. It ranges anywhere from 3%-27% (in Hungary!) depending on the country. The US doesn’t, or hasn’t. That’s not for lack of trying.
The lack of such a tax is due in large part to then President Reagan’s fierce opposition, the last time it was seriously brought up. Why was Reagan so against it? Because it’s invisible: it’s “baked in” to the price of a product. And Reagan believed–with good reason–that since Congress can’t help themselves but to spend money, if taxpayers weren’t visibly seeing their taxes raised more and more and more, Congress would just raise these invisible taxes more and more and more. And people would just think things were getting more expensive even if they actually weren’t.
That’s why it’s called a “Value Added Tax”, because unlike an income tax, or even a local sales tax, this tax is added to the total value of a product, so the consumer doesn’t see it. (It’s also why Trump got mad and called Jeff Bezos when Amazon was going to separate out the tariff rate from the base price of items listed on its site).
Republicans though, do tend to kind of like the idea of this type of VAT, because it’s really a tax on the poor, because it covers everything; there’s no exemptions and everybody pays the same rate. Except less wealthy people tend to buy more cheap goods that are imported. And get more tax breaks at a local level on things like food and clothing, which now they won’t as much. And for now the blanket tariffs are only on imports. So they’re hit harder. (And we all pretty much know by now that it’s American consumers who pay the tariffs and Trump’s assertion that it’s the other counties is garbage.)
But historically, Democrats don’t hate it either, because they also love to spent money. And if they can do it silently, even better.
So will it stay limited to imports? Or will Congress or the President at some point say “let’s just put a 10% (or more) tax on everything”? Probably doesn’t matter much. And the US would be more progressive than other countries if it let American-made products be sold free-and-clear of this tax and only do it for imports.
A better question to ask is will it go away if Trump does? If the most ludicrous Trump tariff numbers do? Even if Democrats regain control of Congress or the White House? With ever-growing deficits, I think the answer is a clear no. A 10% (at least) tax baked in to most of the things Americans buy is here to stay.
So in the end, Trump may have just snuck in a new, permanent tax amounting to at least 10% on a huge portion of everything we buy, forever, and we–because we’re too distracted by 145% tariffs on China, and threats of annexing Canada (which has a VAT of around 15% depending on the Province, BTW)–didn’t even notice.