Trump’s policies: Short term pain, long term gain

We will be proud to say “Made in America.”

The most recently released economic numbers don’t look good. The rate of inflation which had inched down the last two months, started to inch up. The stock market sees so much uncertainty that stock prices continue their downward trend. And then there are tariffs.

It looks like the short -term impact of tariffs may be painful. If the 25% tariffs stick, your favorite European cars will be more expensive as will all Canadian and perhaps Mexican goods. Nearly all American made cars have components made elsewhere, so their prices will rise too.

A tariff most definitely adds to the cost and increases the price just like a tax. The question is how much of the increase will be passed onto consumers in the form of higher prices and how much the producer must absorb. Essentially, that is determined by how badly consumers want the product and how readily a consumer would seek alternatives.

For products that consumers “must have”, the consumer will pay most of the tariff. For products where consumers say “I like the product if the price is right”, the consumers will pay a smaller portion of the tariff. Either way, the price of products imported to the USA will rise.