A Basic Breakdown of Tariffs from a Purdue Research Professor
WEST LAFAYETTE, Ind. — A research professor at Purdue University breaks down tariffs and their economic impact on the United States.
Channing Arndt, who’s also director of the Global Trade Analysis Project which is housed at Purdue, spoke to the Associated Press recently to give his basic explanation of tariffs, now that they have become a more prevalent economic tool in the U.S.
“Tariffs are simply taxes on imports,” said Arndt. “The main idea behind tariffs is to stimulate domestic production.”
The example he gave was “if there’s $1 million worth of goods coming in from a foreign country and the tax is 50%, they owe $500,000 in order to bring it into the country and that money goes as revenue.”
By increasing the price of imported goods, consumers are encouraged to buy locally produced items instead. However, many high-demand products are not currently manufactured in the United States and are instead reliant on overseas production.
Prices will go up, if they haven’t yet already, with consumers, Arndt believes, taking on that price increase.
“You can expect to pay more for labor-intensive goods for quite some time,” Arndt said.
Another way President Donald Trump has used tariffs is to achieve objectives that are not necessarily related to trade or domestic production. For instance, with Mexico and the flow of fentanyl into the U.S.
“We want Mexico to do something more to reduce fentanyl import flow into the United States and so we threaten tariffs and try to stimulate some action on the other side of the border,” Arndt explained.
“Sometimes it’s also for revenue,” he added. “But, that’s typically in places where you don’t have really good other sources of revenue.”
Another example Arndt used to break down the use of tariffs by the U.S. on other countries is with underwear.
“Everybody buys underwear and in the United States, we produce very, very little underwear. It’s almost all done overseas. There’s no domestic production to take over. So tariffs will, you know, a big tariff on — and a lot of the textile and clothing exporters are getting big tariffs — will cause consumer prices to rise,” Arndt said.
