Maria shares a short anecdote about how tariffs on washing machines led to an increase in their prices by up to 225% of the tariff, but not only that, the prices on tumble dryers also increased by the same numbers, even though there was no extra tariffs on those.
Maria explains that there might be a different outcome this time around, but she deems it unlikely. Households and importing firms will in all probability bear the brunt of the costs again. At the same time, firms in the rest of the world will likely see decreasing export flows to the US.
So what does president Trump want to achieve?
“There are probably several motives, like increased tax revenues from abroad (though note again, the revenue actually comes from Americans!), protecting certain sectors in the USA and forcing companies to place their production in the USA. He might also use the threat of tariffs as a means to coerce countries like Panama, Colombia, Mexico, Denmark and Canada to do what he wants, though paradoxically, if they do comply, then he would have to rescind the tariffs and lose the income he wanted. Still there is more to this than economics, since we also know from research that he gained political support even in areas where the tariffs failed to have their intended effect” says Maria Persson.
Would you like to add something that did not come up during our last discussion?
”Yes, there is one thing that comes to mind. when it comes to President Trump’s proposals about introducing so-called reciprocal tariffs, it is important to realize that they would not only take into account other countries’ tariff levels, but also things like tax rates, regulations and really any other policies that the US government deems ‘unfair’ to US exporters. Such tariffs could therefore be very far-reaching, with substantial implications for international trade,” says Maria Persson in closing.