Tariff is a tax levied on imports only. Tariff will make imports more expensive in the market. For example, if the original price of a “Made in China” T-shirt is $5, with a 20% tariff, it becomes $5*(1+20%)=$6 when sold in the U.S. market.
Tariff has multiple impacts. On one hand, tariff may protect the domestic industry from foreign competition and help government of the importing country gain some tax revenues. On the other hand, consumers will have to pay more (or consume less) because of increased market price as result of tariff. Tariff also hurts exporters and those sectors operating on a global basis. For example, a high tariff rate on imported fabrics may raise the production cost of a clothing manufacturer which sells its finished products to the world market. According to the World Trade Organization, nearly 60 percent of world trade today are inputs and components.
Questions for discussion:
- How to explain the phenomenon that tariff rates are so different across different types of product in the picture? Should they be so different?
- Should tariffs on flats, sneakers, boots and moccasins be lowered or eliminated in the U.S. or even world wide? What issues need to be considered?
8 thoughts on “Tariff or Not”
In the above photo, nothing has tariffs besides shoes and the basketball. Tariffs are a tax on imports and exports, they’re put onto different items in different increments. A tariff is based off of the materials used and if it’s being imported or exported. I personally believe that the tariff on shoes should not be so high. Shoes are something everyone needs, shoes are the most basic necessity of every persons wardrobe. The tariff on shoes should most certainly be lowered if not eliminated. I’m assuming they have such high tariffs because they are made cheaper in other countries and then imported to the U.S.
Great observation and thinking.
There are two issues here: the first one is why tariff rates on shoes (as well as on textile and apparel products) are much higher than products like electronics, papers and cell phone. This is largely about history: in the past decades, the main participants in tariff cutting in the world were established developed countries. In comparison, most developing countries used the provisions of special and differential treatment to effectively opt out of negotiations on tariff cutting. The result was that the established developed countries reduced tariffs on products of export-interest to themselves (more high tech products such as computers and electronics), at the expense of products of export-interest to developing countries (such as shoes, textiles and apparel). On the other hand, shoes industries in the developed countries also vigorously ask for trade protection from the government.
Then the second issue is should tariff rates on shoes be higher than others? Different stakeholders may have different views, but one reality is, it is very difficult to cut them because of the political aspects of trade (recall our lecture today on trade politics)
Shoes seem to have a very high tariff compared to other products as seen in this picture. This high rate however is not necessarily bad or needs to be lowered. As mention, a tariff is a tax on imports so the United States government actually benefits. It can then use this revenue to support and protect domestic efforts, issues, and policies. The US import apparel consumption is extremely high compared to other products so higher tariffs in this industry can produce optimized profits. In addition, many apparel imports have low prices already from cheap labor coast from abroad so the significant increase in cost to consumers in the US is really minimal, as expressed in the example of raising the price by only a dollar. Also on has account for the fact that shoes last much longer than clothing so the turnover rate is much lower with consumers so a higher tariff can account for less constant demand. This high tariff can also stop the flooding of the market with cheap imported shoes and can be used to stimulate and protect domestic industries and protect foreign developed countries (Europe) stakes in the market.
great thinking!. Would like to “challenge” you more: Think about this : those who purchase imported shoes have to pay extra tax and those who purchase “Made in USA” shoes do not have to. But who is usually shopping at Wal-Mart and who usually can afford more expensive “made in USA”? Is it fair?
In the above picture, there is no tariff rate, or a very little, on everything besides the shoes the children are wearing. I believe that if there is to be tariffs on imports there should be a set rate. The tariffs on flats, sneakers, boots and moccasins should be lowered because shoes are basic needs of humans. They are something worn to protect the feet, and should be more affordable even if they are not mad in the U.S.
Tariffs aren’t implemented on anything except for the shoes in the picture above. To me, it makes sense that shoes were tariffed the most because that product seems like it would be outsourced from other countries. The noticeable difference in tariff taxing is that the shoes are the product that has the most depth in it, there are laces and different fabrics used in it so I think the tariffs should be different because of the different amount of sourcing and efforts that go into a product. I don’t think tariffs on flats, sneakers, boots, and moccasins need to be lowered or eliminated because of the effort in sourcing and manufacturing that goes into it. Issues that need to be considered in this area are the fact that different items are tariffed differently. I stated before that some items should be tariffed higher because of the higher effort that goes into them but there should be a universal tariff on certain amounts of effort that goes into each product. If this is done then I think it would be fair and each country would accept the tariffs.
I think that the basis of the tariff differences has a large amount to do with materials. There are large differences in materials, and skills needed to produce each different kind of shoe. A sneaker is much different than a hiking boot which would require multiple materials and serves a different function. I don think that people should be surprised by the tariff differentiations. Houses are priced differently based on a multitude of factors: location, size, amenities etc. Any produced good is made of unique qualities which require certain skills and money to be able to create.
Very creative thinking 🙂