Voting for Trump? Get ready for a depression.
I was listening to a Donald Trump speech today. He was ridiculing and name calling his competitors, and rambling on about many subjects, jumping from one subject to another, without completing a sentence or a thought on any of them.
Then he started in on our trade imbalances. He named Mexico, Japan, China, and “many others”, and moved on to the companies who have recently moved to Mexico.
Nabisco, “no more Oreos”, Ford, and Carrier Air Conditions, “no more Carriers, I won’t buy any more of them and let me tell you I buy a lot of Carriers”, (paraphrased because I can’t remember his exact words). Then he said that he will tax carrier 35% on all the units they sell here in the states as punishment for taking jobs from the U.S. and moving to Mexico.
I hear the crowds cheering him enthusiastically, every time he brings up the subject of Tariffs.
Mr. Trump has many times claimed that Mexico will pay for building, “The Wall”. When asked how he will make them pay for it, he said he would place Tariffs (or taxes), on everything they ship to the U.S.
Do you know what happens when a Country places Tariffs on goods? Have you thought about the consequences to yourself, if this should happen? Have you heard of Trade Wars and do you understand the consequences of them?
Let me give you a simple example. Carrier sells an A/C for $2,000.00. Trump slaps a 35% tax on the unit. That’s $1,300.00 for Carrier and $700.00 for the U.S. Treasury, right? Wrong! Carrier wants $2,000.00 for that unit.
Carrier will not make or sell that unit for under $2,000.00.
What Carrier will do is raise the price of that unit from $2,000.00 to $3,077.00. Now, 35% of that $3,077.00 is $1,077.00 which will go to the U.S. Treasury supposedly to pay for the wall. That leaves 65%, $2,000.00, for Carrier. Work the math for yourself. I rounded $0.05 for simplification.
Is Carrier or Mexico hurt by this? No. Is Mexico paying for that wall? No. You, the consumer are hurt. You just paid a $1,077.00 price increase, (hidden tax), for your unit to pay for the wall.
Now, start adding everything you buy from these countries; shoes, clothing, produce, automobiles, furniture, fruit, and nearly everything in your house. Think about how much more you will have to pay for nearly everything you eat or use.
For another example a $20,000.00 car will cost you $30,770.00. You’ve just paid $10,770.00 tax to the U.S. Treasury as a punishment for unfair trade deals with Japan. Did you hurt Japan or did you hurt yourself? Feel good about sticking it to Japan with that nasty Tariff? Or do you feel like an idiot for punishing yourself?
Can you afford to lose 35% of your spending power? Do you earn enough to pay all of those hidden taxes and still keep a roof over your head, pay your utilities, and feed your family? I can’t.