What is the Real Purpose of Trump's Tariffs?

The Tariffs Are Intended to Shift the Tax Burden to Working Americans

Trump’s tariffs are intended to increase the tax burden on working Americans so that the tax burden on the very rich can be reduced. The tariffs are not intended to boost American manufacturing. Trump's talk about boosting American manufacturing is just a sales pitch. It is fake just like the rest of Trump’s populist pitch. The real purpose of the tariffs is to shift the tax burden from the wealthy to working Americans and in this, the tariffs have been and continue to be successful. Many economists have taken the sales pitch seriously and have said that the tariffs will not boost American manufacturing. Trump has ignored their criticism because he doesn’t care. Boosting manufacturing was never really the goal.

The Tariffs Have Not Been Designed to Boost Manufacturing

The haphazard, arbitrary and scattershot way that the tariffs have been designed and implemented shows clearly that they are not intended to boost American manufacturing. A tariff that boosts manufacturing must be very carefully planned, and it must be narrowly focused on specific sectors that the tariff can benefit. Trump and his advisors know that. Of course, they do, but they have not designed his tariffs that way. Instead, they have imposed tariffs on all sorts of imported goods in an arbitrary and capricious manner that leaves businesses full of uncertainty. None of this would make sense if the purpose of the tariffs were to promote American manufacturing.

On the other hand, if the purpose of the tariffs is to raise revenue in a way that shifts the tax burden from the wealthy to working Americans, Trump’s approach is very effective. A tariff is a consumption tax just like a sales tax. Ordinary working people spend most of their incomes on consumption because they have to. Rich people, on the other hand, are able to save and invest a larger share of their incomes. Thus, ordinary people are more heavily affected by a tariff than rich people are. The president and his advisors know all of this. So, the idea that their policies are intended to boost American manufacturing is not credible, but the idea that the tariffs are intended to shift the tax burden to working Americans makes perfect sense.

Deporting Immigrants Makes Boosting Manufacturing Impossible But Trump Doesn't Care

Our president’s policy of deporting immigrants also gives away his real intentions. The policy shows that he has never really intended to boost American manufacturing. Deporting immigrants is incompatible with boosting manufacturing because manufacturing needs workers. There are currently almost 400,000 unfilled manufacturing jobs in the United States, and deporting a large share of our work force will not make filling those jobs any easier. Certain key sectors will be especially hard hit by the deportations, and one of those sectors is construction. Around 32.5% of the workers in the construction trades are immigrants. If they are deported, who will build the factories that boosting manufacturing will require? The president and his advisors know this, too. So, we must assume that Trump is lying when he says that he wants to boost American manufacturing.

On the other hand, if the tariffs are intended to increase the share of our government’s revenue that is paid by working Americans instead of the rich, the president’s policies make perfect sense, and in that way, they are already successful. The tariffs are bringing in substantial revenue. Moreover, this understanding of their purpose fits well with the reduction in income taxes that was recently passed in the president’s OBBB.

The Tariffs Are Working as They Are Intended to Work

This blog has said many times that Trump’s populism is fake. Neither he nor his party has any interest in improving the lives of working Americans or in creating manufacturing jobs. His real goals are the goals that the Republican Party has pursued at least since Reagan’s days. Republicans want to cut the taxes paid by the wealthy, and they want to eliminate government programs like Medicare that effectively redistribute income from the wealthy to working Americans. The populist pitch is just a way to attract votes to Republican candidates.

Critics of Trump’s tariffs who take his populist pitch seriously are missing the point. Trump and his advisors are not clueless. His tariff policy is working exactly as it is intended to work, and working Americans are paying its price.