Hidden Taxes You Didn't Know Existed

Tariffs: they're one of the most debated topics in economics and, recently, politics. Are they the secret weapon to bring business back to America and boost our economy, or the ticking time bomb with hidden cost for consumers and businesses alike? Today on We're Talking Money, I'm going to dive into how tariffs work, their potential benefits and the risks, and whether they've delivered on their promises over the years.

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First, what exactly are tariffs? A tariff is a tax, and it's imposed on anything imported. So anything that we bring into America could get a tariff, and if a tariff is placed on those goods, it is really just designed to make those foreign goods more expensive.

The idea is simple: by increasing the cost of imported goods, these tariffs encourage consumers and businesses to buy domestically. They want domestically produced products to sell before imported, and that's part of what a tariff can do. In other words, these penalties are supposed to protect US industries, and jobs for that matter.

So let's look at an example where tariffs seem to do their job, and do it pretty well. Back in the 1960s, the US imposed a 25% tariff on imported light trucks. Now, this tariff was known as the chicken tax, which was originally a response to European tariffs on American poultry. It had a long-lasting impact on the automotive industry.

Toyota is one of the world's largest automakers. After that 25% tariff on their light trucks, they eventually decided it made a lot more financial sense to just manufacture right here in the US, and that allowed them to avoid the tariff quality. It created a lot of jobs right here in America, and it bolstered local economies. Now, in my opinion, that is a tariff that worked.

But let's talk about the trade-offs. For businesses, tariffs can level the playing field by protecting them from unfair competition. They can bring back manufacturing jobs, that's exactly what they're supposed to do, and even boost national security by reducing dependence on so many foreign supply chains.

But what are the risks? They can often mean higher prices. Generally it's a pass-through. The businesses, plain and simple, they're going to pass those additional costs down to us, the consumer. They tend to strain international relations. They can also provoke retaliatory measures from other countries. Now, that can hurt US exporters like farmers or even tech companies.

So a recent example is the trade war between the US and China. Tariffs, of course, under President Donald Trump and his first term, they were imposed to reduce trade deficits and hopefully bring manufacturing back to America. Some industries, like steel, for example, definitely saw some relief. Others, especially agriculture, maybe the relief was not quite as noticeable, and that's because China retaliated with some tariffs on US goods.

It's a mixed bag, to say the least. Some manufacturing jobs came back, some consumer costs increased, and certain sectors took a hit.

We have a newly elected president who's taking office on January 20th 2025. That's Donald J. Trump, and he's one of the strongest proponents of tariffs.

To me, the most beautiful word in the dictionary is tariff, and it's my favorite word.

First, when tariffs bring production back to America, that is a huge win for workers and the local communities. Now, success of these tariffs depends on execution. President Trump will be targeting industries that can genuinely thrive here in America. He's not going to focus on businesses that just need a quick fix. And President Trump already knows from experience that tariffs are not a cure-all. They are a tool. If he uses them the right way, America can gain strength, create growth, and build a lot of high-paying jobs.

If we get growth in our country because of these tariffs, because we're bringing jobs back, this can mitigate the risk of exports slowing, and it should largely offset any price increases that result from imported goods that are affected by these tariffs.

Are tariffs good or bad? It's complicated. There is no simple answer. They do carry some risks, and those shouldn't be ignored, but they can protect US industries and jobs and create a lot of growth. In fact, there was a time, if you go back far enough, when tariffs were America's greatest source of income.

So what's your take on tariffs? I know this is a controversial subject. Some people hate them, some people love them, a lot of people have no idea what they are or how they work. But how have you seen them help or hurt your industry? Let me know in the comments below.

And as always, don't forget to like, subscribe, and hit that notification bell so you never miss an episode of We're Talking Money. I'll see you next time on We're Talking Money.