In praise of cheaper goods

En collaboration avec Daniel Bunn*

It’s hard to conceive of the American dream without access to affordable goods.

Consider how America’s middle class lives today. They own their own houses, have access to limitless entertainment options, and have a diet which consists of food that come from halfway around the world.

That we can access all that on a middle-class income, historically, has not been the norm. It’s a triumph that has only been made possible thanks to the complex supply chains that bring us these goods from far-away places and compete to keep costs low-enough for us to be able to afford them.

No matter what Treasury Secretary Scott Bessent might think, access to cheap goods is a  key building block upon which the American dream is built. And it is one the current administration now threatens with its crushing tariffs.

Take President Trump’s most recent move to impose 25 percent tariffs on most goods originating from Canada and Mexico, and a 20 percent tariff on goods coming from China.

Canada responded at a similar scale with 25 percent retaliatory tariffs on $ 20.8 billion of US exports on March 4, with 25 percent tariffs on another $86.7 billion scheduled for March 23.

What this amounts to is a tax that gets charged every time a good or one of its components comes from one of these countries into the United States. And like any tax, much of it gets passed down to the consumer.

At the Tax Foundation, we estimated this would represent a $102 billion tax hike this year, or the equivalent of $767 per American household.

That’s not chump change. In fact, these tariffs alone represent a tax increase the size of Obamacare, coming in at $106.2 billion when adjusted for inflation

Some will say there’s an easy way to avoid paying this import tax. After all, if you buy Michigan maple syrup, instead of Canadian, for instance, you’re not directly paying for this tax hike.

While technically true, you’re still paying for it in other indirect ways. If more Americans make a similar switch, demand for Michigan’s syrup will increase, which will cause prices to increase. In fact, Michigan producers may recognize the tariffs as an opportunity to increase prices even if consumers don’t shift their purchasing patterns.

That’s bad news for the consumers and restaurants who now have to pay more for the same product. Imagine this playing out at all levels throughout our economy.

Whether we look at it as consumers of these goods, or as middle-class workers who transform them, low-cost goods have been the underpinning of American prosperity. Adding tariffs on them puts it all at risk on both sides of our shared border.

The result is that the average American will be able to afford fewer of the products they want and need with their paycheck.

Another effect though, and much more pernicious, is what it will do to American competitiveness around the world.

That’s because those tariffs directly hurt all the US-based businesses who transform products coming from around the world into consumer goods.

A lot of the refineries in the Midwest, for instance, have been built to transform Canadian heavy-crude oil into products such as gasoline and kerosene.

These refineries buy $100 billion worth of Canadian oil every year and transform it into $300 billion worth in products that they then sell within the United States and export to other countries around the world.

If the cost of their inputs go up, you can be sure it will be felt in their sale prices. If their foreign consumers find a cheaper option, they’ll switch to it in a heartbeat.

Or think of General Motors and Boeing, who transform steel and aluminum into cars and airplanes. If the cost to purchase these metals in the United States goes up because of an administration’s decision to tax steel and aluminum products coming from Mexico and Canada, you can bet it will be reflected in their sales prices.

Meanwhile, foreign competitors such as Toyota or Airbus, who have large manufacturing capabilities outside of the United States, won’t see any increase in the cost of their inputs. They’ll be more than happy to pick-up any market share that has been left vacant due to their American competitors’ artificially higher costs.

That’s not something theoretical either. During the first Trump presidency, targeted tariffs on steel caused 80 American jobs to be lost in the steel transformation sector for every additional job they created in the steel manufacturing industry. The lost competitive edge from tariffs was very real then and still is today.

Whether we look at it as consumers of these goods, or as middle-class workers who transform them, low-cost goods have been the underpinning of American prosperity. Adding tariffs on them puts it all at risk on both sides of our shared border.

Daniel Bunn est président et directeur général de la Tax Foundation, basée à Washington, D.C. Daniel Dufort est président et directeur général de l’IEDM. Ils signent ce texte à titre personnel.