Trump’s Tariffs: Serving America or the Elite?

By Elicia Yip - Hong Kong

President Trump’s America First Policy 

The America First Policy is the foreign policy by which, in theory, the United States will always put America and its citizens first. But in reality, is this really what President Trump will bring? The proposed national and international tariffs are designed to protect American workers, revive manufacturing, restore the nation’s economic dominance, and usher the U.S. into a new era of American prosperity. Yet, he will impose greater tariffs (a tax on the import of goods between countries and the U.S.) on everything from industrial products to wood to even whole nations, a burning question arises: who benefits from these policies?

Donald Trump has stated that as part of his first executive orders as president, he intends to impose an additional 10% tariff on China and a further 25% on Mexico and Canada, the two largest trading partners of the United States. These are built upon his previous tariffs worth $80 billion on around $380 billion in imports, imposed in 2019 on a range of imported goods, targeting products such as steel, aluminium, and hundreds of billions of dollars worth of Chinese imports. These measures aimed to address what Trump described as unfair and unbalanced trade, particularly with China, requiring the investigation of trade deficits, currency manipulation, and unfair practices. 

A primary justification for these tariffs was the U.S. trade deficit, which had risen during Trump's four years previously; he argued it was a symptom of America being ‘ripped off’ by foreign competitors. Imposing taxes on imported goods encourages domestic production and reduces dependency on foreign suppliers. These tariffs are also seen as leverage over countries to pressure them into fairer or more favourable trade negotiations. To protect U.S. business interests, he is continuing and increasing tariffs till Canada and Mexico have addressed the alleged trafficking of fentanyl and the movement of illegal immigrants across the United States. 

Domestically, Trump has justified the tariffs by citing the national security provisions within the Trade Act and the Trade Expansion Act to paint them as a victory for American workers, particularly in manufacturing-focused states and regions. He emphasised his rhetoric for bringing back many jobs for local factories and production industries while rejuvenating the nation's wealth. 

The Unspoken Impact on American Households 

This has been proven to be complete hypocrisy and a significant controversy. Although Trump’s tariffs were promoted to improve American lives and protect their workers, the economic reality for many middle- and lower-income households is far less favourable. The increased tariffs and tax cuts for big businesses and corporations automatically shift the tax burden and the rising consumer prices onto the average consumer in the United States. The tax on imported goods, such as electronics, clothing, and household items, directly increases the cost for businesses and consumers. Lower-income households will be forced to spend a large portion of their income on the increased cost of basic goods and everyday items while their income remains the same. This causes the average household estimated to face an additional $1,300, or around £1,100, in increased taxes annually.

Beyond consumer goods, tariffs will also affect the industries critical to the middle and working classes, such as manufacturing and agriculture. If tariffs were placed on Canada (13.7% of all imports) and Mexico (15%), as stated by Think.ing.com, over 3 million American jobs would be negatively impacted, according to the USMCA Auto Report cited in Americanprogress.org.

Manufacturing companies require materials produced locally and internationally; thus, restricting international imports hinders the ability to compete with external companies. It would result in a production decrease, raising the prices locally while losing income globally, causing many jobs to deplete within this industry. 

Furthermore, tariffs placed on cooperating international partners and allies could create a strain between the nations. Although unlikely, world leaders may work collectively to oppose the tariffs to ensure a consistent supply of their materials and further isolate the United States. It will become challenging for manufacturers to sell their goods abroad, leading to pressures on wages and working benefits for the 10 million workers across the country who heavily rely on exports. Previously in 2019, China had imposed retaliatory tariffs, contributing to significant losses for American farmers, who had relied on export markets for their livelihoods. 

While Trump's tariffs aim to protect domestic jobs and industries, their implementation will impact American citizens economically and socially. “Revenue generated from tariffs is deposited in the U.S. Treasury; it is not used to finance the build-out of U.S. manufacturing competitiveness, train workers for the jobs of tomorrow, or support increased research and development.” (Center for American Progress). There is also no guarantee for higher wages, as many companies will have to cut costs to fund the taxed imports and a decrease in welfare benefits or improved working conditions. The cumulative effect of these burdens will inevitably send many American lives—both middle and lower class—further into debt or economic instability. 

How the Wealthy Benefit from America First 

In stark contrast, the wealthy and powerful will end up reaping the biggest rewards, whereas the top 1% will only have a loss from the tariffs of 1.4%, whereas the bottom 20% will lose over 6%. Foreign companies and imported goods will be forced to pay the tariff by increasing the price of their product, appearing less attractive to buyers who can no longer afford it or find it difficult to pay for. This allows domestic companies, with reduced foreign competition, to seek the opportunity to maximise their profit by slightly increasing their prices while having a higher demand from American citizens. Domestic corporations do not have to pay the tariff and the gains will go directly to the company’s executives and shareholders rather than towards workers. Some companies avoid this by building a part of their company and production line in the U.S., resulting in additional income for the owners and investors. Furthermore, those who can invest and own shares in domestic companies will experience huge profits and will benefit greatly. 

Additionally, even with the increased cost of imported and domestic products, it would not hinder the daily spending of the top 5% in the U.S. but is only seen as a mere inconvenience. Trump proposed the use of tariffs to reduce the American income tax. However, it will only lessen the high amounts of income tax the top 1% have to pay, while the lower-income households will pay in some indirect way the tax caused by the tariffs. 

Who benefits from Trump’s tariffs? Though marketed as beneficial for American citizens and workers alike, it will ultimately reveal and widen the economic divide in the United States. The wealthy are guaranteed to enjoy increased profits, stock gains, and a surge in demand for domestic products, leaving the middle and working class to bear the brunt of the policy’s unintended (or intended?) consequences. Rising prices, job losses, and economic uncertainty will become the daily realities for millions of Americans. Did Trump ever want to level the playing field? Or even protect the working class? Complete coincidence or not, while having some benefits that could safeguard national industries in the short term, the tariffs will simply reinforce existing inequalities and disrupt global trade. 

Looking ahead, it is of utmost need that the tariffs and Trump must follow a fairer approach to prioritise long-term economic stability for all Americans, ensuring that costs and benefits are distributed more equitably. There is a great possibility that Trump will declare a national emergency over the threat of trade deficits, directly linking to his need for international tariffs. Without this balance, the tariffs will become the tool favouring the wealthy under the guise of protecting the nation and will ultimately reveal that “America First” truly means “Wealth First.”. 

Bibliography

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