Houston – The Trump Administration is escalating a global trade war with tariffs of at least 10% on all countries and rates even higher for other countries.
“Tariffs are a tax basically on imported goods only,” said University of Houston economics professor Dietrich Vollrath. “The way to think about a tariff kind of most cleanly for kind of the regular person is it’s like sales tax. Like you would pay a Target or an HEB, but only on the specific things that are imported from another country.”
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Vollrath explains tariffs are what companies must pay the U.S. Customs and Border Protection officials at the port of entry before an item is sold at American stores.
“It’s the equivalent to going back about 100 years or more in terms of how high the tariff rates are," said Vollrath. “It’s the single biggest tax hike in history."
The tariffs could impact the price of goods on everything from smartphones, groceries, cars and clothing.
“The size of the amount of imports we do is trillions of dollars in an economy,” said Vollrath. “But the tariffs also apply to things that you and I don’t buy, but that get used by businesses in the U.S. to make things that we buy."
For example, a Ford car’s price may go up although Ford is an American company because of the parts that are manufactured outside the U.S., according to Vollrath.
Vollrath said the country could ‘absolutely’ hit a recession.
“This is completely generated by a policy choice,” said Vollrath.
Trump has argued tariffs will increasing spending on American goods and create manufacturing jobs in the country.
“There’s no incentive based on this because the opportunities to trade abroad are going to be limited,” said Vollrath.
The stock market lost more than $3 trillion in revenue after Trump announced the tariffs.
