Tariffs: Hot topics of the 2024 election, defined

Young voters under 30 are the least affiliated with a particular party (38% say they are independent or unaffiliated). They are also the least likely to vote (nearly half sat out of the last presidential election). In what is projected to be a tight presidential election in just a few days, getting young voters to the polls could make the difference for either candidate. But only 1 in 3 say they feel prepared to research candidates or issues. As Election Day approaches, we’ve enlisted OHIO faculty experts to help define some of the hot topics of the 2024 election (like inflation and gerrymandering).

Additional information about OHIO’s ongoing commitment to fostering a civically engaged community as part of this year’s election cycle, including student resources, educator resources and frequently asked voter questions, is available online. 

According to Dan Karney, associate professor of economics in the College of Arts and Sciences, a tariff is a tax on a good (or service) that is paid by the domestic firm that imports a good (or service) from another country. The Office of the United States Trade Representative (USTR) reports that the current trade-weighted average tariff rate is two percent for industrial goods. Thus, on average, a U.S. firm is taxed $2 for every $100 of industrial goods imported from other countries.

Karney explains that for tariffs, the importing firm has the statutory requirement of remitting the tariff fees to the federal government. However, the economic incidence of the tariff (and all taxes, for that matter) depends on the economic characteristics of the market for the good.

“If there are no available domestic substitutes for the imported good, then the seller of the imported good can raise the price of the good and thus pass the tariff burden onto consumers,” Karney said. “Over time, more domestic substitutes may become available in response to higher prices.”

Roberto Duncan, a professor of economics in the College of Arts and Sciences, also weighed in to define tariffs, saying while importers pay the tariff, this cost usually gets passed on to consumers, raising the price of those goods.

“For example, if a tariff is placed on a final good like a washing machine, it can make imported washing machines more expensive. This could help U.S. producers of washing machines, as their products would be relatively cheaper and more competitive,” Duncan explained. “If the tariff is on an intermediate good, like steel, which is used to make a final product (such as cars), it raises costs for businesses that use that imported material. These higher costs often end up increasing the price of the final product—in this example, cars. As a result, consumers will end up paying more for either the imported goods or the products that use imported materials.”

According to Duncan, tariffs are used to protect local industries, raise government revenue, or penalize countries for unfair trade practices. If tariffs are imposed unilaterally, they can lead to a trade war, where other countries respond with tariffs on U.S. goods. This is something we saw starting in 2018, when U.S. trade partners imposed their own tariffs on American exports in retaliation for U.S. tariffs.

Duncan explains that, while the Biden administration has removed some tariffs, many remain because the U.S. sees China's trade practices as unfair. The tariffs are meant to pressure China to change its policies related to intellectual property, technology transfer, and state subsidies.

But there's another reason for keeping these tariffs, according to Duncan: they bring in money for the U.S. government. 

"The revenue that they generate which has been used to fund government expenditures, including the public debt service and transfers to households—especially essential during the difficult pandemic times. A substantial tariff cut would increase the public deficit, particularly in a period of expansionary fiscal policy,” he said.

Political considerations also matter. According to Duncan, eliminating tariffs on Chinese products could be seen by some Americans as being “soft on China” or indifferent to domestic industries affected by Chinese competition. Additionally, both Democrats and Republicans in Congress have largely supported tariffs on Chinese imports, although there has been more disagreement regarding tariffs on imports from Canada and European economies.

In the 2024 Presidential election cycle, both major party candidates have discussed tariffs in the context of their economic policies. Former President Donald Trump has proposed a 60 percent tariff on all goods (or services) from China and tariffs ranging from 10-20 percent on imports from all other countries. Vice President Kamala Harris said in a statement to the New York Times that a Harris administration would “employ targeted and strategic tariffs to support American workers, strengthen our economy, and hold our adversaries accountable.” The Biden administration currently has a 100 percent tariff rate on electric vehicles from China.

“As it stands, former President Trump has proposed high tariffs: 60% on goods from China and 20% on all other U.S. imports, whereas, Vice President Harris is expected to keep the tariffs that are already in place,” Duncan said. “If tariffs increase during the next administration, businesses will face higher costs and consumers will see prices go up."

Higher tariffs can also slow down economic activity by increasing costs for businesses and raising prices for consumers. Although tariffs are sometimes used to protect U.S. industries from foreign competition, according to Duncan, it is unlikely that they will bring back manufacturing jobs lost in recent decades.

Duncan also explains that many U.S. voters have mixed feelings about tariffs and free trade.

“They like the variety and lower prices that free trade brings but worry about the impact on jobs and wages,” he said.