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Companies Scrambling To Respond To Trump’s ‘Beautiful’ Tariff Hikes

Published

3 hours ago

11 minute read

From the Daily Caller News Foundation 

By Adam Pack

Companies are scrambling to respond to President-elect Donald Trump’s “beautiful” tariff proposals that his administration may seek to enact early in his second term.

Proactive steps that companies are taking to evade anticipated price increases include stockpiling inventory in U.S. warehouses and weighing whether they need to completely eliminate China from their supply chains and raise the price of imported goods affected by tariff hikes, whose costs will be passed onto consumers.

Free-trade skeptics are touting companies’ anticipatory actions as delivering a clear sign that Trump’s proposed tariff hikes are already achieving their intended effect of pressuring retailers to eliminate China from their supply chains. However, some policy experts are warning that higher tariffs will be a regressive tax for America’s lower and middle-income families and make inflation worse, according to retailers and economists who spoke to the Daily Caller News Foundation.

On the campaign trail, Trump proposed a universal tariff of up to 20% on all imports coming into the U.S. and a 60% or higher tariff on all imports from China. Trump is considering Robert Lighthizer, the former U.S. trade representative during his administration’s first term who is well-known for favoring high tariffs, to serve as his second administration’s trade czar, the Wall Street Journal first reported.

‘Mitigation Strategies To Lessen The Impact’

Companies are taking preemptive measures, such as stockpiling goods in U.S. warehouses, to work proactively against anticipated price increases that higher tariffs would inflict, Jonathan Gold, vice president of supply chains and customs policy for the National Retail Federation, told the DCNF during an interview.

“They’re looking at different mitigation strategies to lessen the impact that they might feel from the tariffs,” Gold told the DCNF. “One of those strategies is to start looking at potentially bringing in cargo, bringing products earlier to get ahead of potential tariffs that Trump might put in place.”

Importing goods into the U.S. ahead of schedule leads to additional costs for retailers that will likely be passed onto consumers, but waiting to import goods from China after a 60% or higher tariff on Chinese imports goes into effect would be substantially more expensive, according to Gold.

A recent NRF study projected that Trump’s proposed tariff hikes on consumer products would cost American consumers an additional $46 billion to $78 billion a year.

“A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter,” Gold said in a press release accompanying the study. “This tax ultimately comes out of consumers’ pockets through higher prices.”

Decoupling From China

Part of the rationale behind Trump’s tariff proposals is to force manufacturing jobs to return to the United States and pressure companies to completely eliminate China from their supply chains, according to Mark DiPlacido, policy advisor at American Compass.

“I hope in addition to stockpiling, they’re also looking at actually moving their supply chains out of China and ideally back to the United States,” DiPlacido told the DCNF.

“For a long time, the framing has been what is best for just increasing trade flows, regardless of the direction those flows are going. What that’s resulted in for the last 25 years is a flow of manufacturing, a flow of factories and a flow of jobs, especially solid middle class jobs out of the United States and across the world,” DiPlacido added.

But completely shifting production outside of China is not feasible for some retailers even if companies have taken further steps to diversify their supply chain for the past decade, according to Gold.

“It takes a while to make those shifts and not everyone is able to do that, Gold acknowledged. “Nobody has the [production] capacity that China does. Trying to find that within multiple countries is a challenge. And it’s not just the capacity, but the skilled workforce as well.”

In addition, companies who move production out of China to avoid a 60% tariff on imported goods from the nation could still get hit by a 20% across the board tariff if they move their supply chain to countries other than the United States, Gold and several economists told the DCNF.

“They’re talking about tariffs on imports for which there’s not a domestic producer to switch to,” Clark Packard, a research fellow on trade policy at the CATO institute, told the DCNF in an interview. “For example, we don’t make coffee in the United States, so why are we going to impose a tariff on coffee?”

“Who are we trying to protect?” he added.

Some economists are also pessimistic that the president-elect’s planned tariff hikes will ultimately bring jobs that moved overseas to cheaper labor markets back to the United States.

“What we actually saw from the 2018-2019 trade war was a decrease in manufacturing output and employment because of the tariffs,” Erica York, senior economist and research director of the Tax Foundation’s Center for Federal Tax Policy, told the DCNF in an interview. “It played out just like every economist predicted: higher costs for U.S. consumers, reduced output, reduced incomes for American workers, foreign retaliation that’s harmful.”

The president-elect’s proposed tariff hikes could also eliminate more jobs than those saved or created as a result of protecting domestic industries, such as the U.S. steel or solar manufacturing industries, that may benefit from higher tariffs on foreign competitors, Packard told the DCNF.

“It’s disproportionate — the cost that is passed onto the broader economy to protect a very small slice of U.S. employment,” Packard said. Trump’s 25% tariff on imported steel enacted during his first administration slightly increased employment in the U.S. steel industry, but each job that was maintained or created came at a cost of roughly $650,000 that likely killed jobs in other sectors forced to buy more expensive steel, according to Packard.

‘Bipartisan Recognition’

Despite tariffs’ potential to force companies to raise the price of goods they import into the United States, DiPlacido defended Trump’s proposed tariff hikes as essential to eliminating U.S. dependence on China for a variety of strategic goods and consumer products.

“We need to be able to manufacture a broad range of goods in the United States. And we need the job security and the economic security that a strong manufacturing industrial base provides,” DiPlacido said. “That’s going to be important to any future conflict or emergency that the United States may have with China or with anyone else.”

DiPlacido, citing Trump’s dominant electoral performance, also believes Trump has the “mandate” to carry out the tariff proposals he floated during the campaign.

“There’s a sort of a bipartisan recognition of the problem. Even the Biden administration kept almost all of Trump’s tariffs in place,” DiPlacido told the DCNF. “I think he has the political mandate, and that’s often a harder thing to get.”

However, some economists are questioning whether the thousands of dollars of projected costs that American families would be forced to pay as a result of these tariff hikes could create political backlash that has so far failed to materialize against Trump and Biden’s relatively similar trade policies.

“Voters were rightly pretty upset about price increases and inflation,” Packard told the DCNF. “We’re talking about utilizing a tool in tariffs that will increase relative prices.”

“Tariffs as a whole are a regressive tax,” Gold told the DCNF. “They certainly hit low and middle income consumers the hardest.”

Retailers are forecasting a decrease in demand for consumer products as a result of Trump’s tariff proposals, according to Gold.

The incoming Senate Republican leader has also notably criticized Trump’s proposed tariff hikes.

“I get concerned when I hear we just want to uniformly impose a 10% or 20% tariff on everything that comes into the United States,” Republican South Dakota Sen. John Thune, Senate GOP leader, said in August during a panel on agriculture policy in his home state. “Generally, that’s a recipe for increased inflation.”

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Business

Chainsaws and Scalpels: How Governments Choose

Published on November 17, 2024

By

The Audit

 David Clinton

Javier Milei in Argentina, Musk and Ramaswamy in the US.. What does DOGE in Canada look like?

Under their new(ish) president Javier Milei, Argentina cut deeply and painfully into their program spending to address a catastrophic economic crisis. And they seem to have enjoyed some early success. With Elon Musk now primed to play a similar role in the coming Trump administration in the U.S., the obvious question is: how might such an approach play out in Canada?

Sure. We’re not suffering from headaches on anything like the scale of Argentina’s – the debt we’ve run up so far isn’t in the same league as the long-term spending going on in South America. But ignoring the problems we do face can’t be an option. Given that the annual interest payments on our existing national debt are $11.7 billion (which equals seven percent of total expenditures), simply balancing the budget won’t be enough.

The underlying assumption powering the question is that we live in a world of constraints. There just isn’t enough money to buy everything we might want, so we need to both prioritize and become more efficient. It’s about figuring out what can no longer be justified – even if it does provide some value – and what’s just plain wasteful.

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Some of this may seem obvious. After all, when there are First Nations reserves without clean water and millions of Canadians without access to primary care physicians, how can we justify spending hundreds of millions of dollars funding arts projects that virtually no one will ever discover, much less consume?

Apparently not everyone sees things that way. Large governments operate by reacting to political, social, and chaos-driven incentives. Sometimes those incentives lead to rational choices, and sometimes not. But mega-sized organizations tend to lack the self-awareness and capacity to easily change direction.

And some basic problems have no obvious solutions. As I’ve written, there’s a real possibility that all the money in the world won’t buy the doctors, nurses, and integrated systems we need. And “all the money in the world” is obviously not on the table. So the well-meaning bureaucrat might conclude that if you’re not going to completely solve the big problems, you might as well try to manage them while investing in other areas, too.

Still, I think it’s worth imagining how things might look if we could launch a comprehensive whole-of-government program review.

How Emergency Cuts Might Play Out

Imagine the federal government defaulted on its debt servicing payments and lost access to capital markets. That’s not such an unlikely scenario. There would suddenly be a lot less money available to spend, and some programs would have to be shut down. Protecting emergency and core services would require making fast – and smart – decisions.

We would need to take a long, hard look at this important enumeration of government expenditures. There probably wouldn’t be enough time to bridge the gap by looking for dozens of less-critical million-dollar programs. We would need to find some big-ticket items fast.

Our first step might be to pause or restructure larger ongoing payments, like projects funded through the Canada Infrastructure Bank (total annual budget: $3.45 billion). Private investors might pick up some of the slack, or some projects could simply go into hibernation. “Other interest costs” (total annual budget: $4.6 billion) could also be restructured.

Reducing equalization payments (total annual budget: $25.2 billion) and territorial financing (total budget: $5.2 billion) might also be necessary. This would, of course, spark parallel crises at lower levels of government. Similarly, grants to settle First Nations claims (total budget: $6 billion) managed by Crown-Indigenous Relations and Northern Affairs Canada would also be at least temporarily cut.

All that would be deeply painful and trigger long-term negative consequences.

But there’s a far better approach that could be just as effective and a whole lot less painful:

What an All-of-Government Review Might Discover

Planning ahead would allow you the luxury of targeting spending that – in some cases at least – wouldn’t even be missed. Think about programs that were announced five, ten, even thirty years ago, perhaps to satisfy some passing fad or political need. They might even have made sense decades ago when they were created…but that was decades ago when they were created.

Here’s how that’ll work. When you read through the program and transfer spending items on that government expenditures page (and there are around 1,200 of those items), the descriptions all point to goals that seem reasonable enough. But there are some important questions that should be asked about each of them:

  • When did these programs begin?
  • What specific activities do they involve?
  • What have they accomplished over the past 12 months?
  • Is their effectiveness trending up or down?
  • Are they employing efficiency best-practices used in the private sector?
  • Who’s tasked with monitoring changes?
  • Where are their reports published?

To show you what I mean, here are some specific transfer or program line items and their descriptions:

Department of Employment and Social Development

  • Workforce Development Agreements ($722 million)
  • Indigenous Early Learning and Child Care Transformation Initiative ($374 million)
  • Payments to provinces, territories, municipalities, other public bodies, organizations, groups, communities, employers and individuals for the provision of training and/or work experience, the mobilization of community resources, and human resource planning and adjustment measures necessary for the efficient functioning of the Canadian labour market ($856 million)

Department of Industry

  • Contributions under the Strategic Innovation Fund ($2.4 billion)

Department of Citizenship and Immigration

  • Settlement Program ($1.13 billion)

Department of Indigenous Services

  • Contributions to provide income support to on-reserve residents and Status Indians in the Yukon Territory ($1.05 billion). Note that, as of the 2021 Census, there were 9,150 individuals with North American Indigenous origins in Yukon. Assuming the line item is accurately described, that means the income support came to $114,987/person (not per household; per person).

Each one of those (and many, many others like them) could be case studies in operational efficiency and effectiveness. Or not. But there’s no way we could know that without serious research.

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Business

DOGE seeks ‘super high-IQ’ people willing to work 80 hours a week for free

Published on November 17, 2024

By

From The Center Square

By 

President-elect Donald Trump’s new Department of Government Efficiency is seeking “super high-IQ” people to work more than 80 hours a week for free.

DOGE co-leader Elon Musk, who is the CEO of Tesla and is one of the richest people in the world, is working with entrepreneur Vivek Ramaswamy to find top talent to cut wasteful spending, overburdensome regulations and re-structure federal agencies. Neither Musk or Ramaswamy will be paid for their work.

“We are very grateful to the thousands of Americans who have expressed interest in helping us at DOGE,” the new advisery group said in a social media post. “We don’t need more part-time idea generators. We need super high-IQ small-government revolutionaries willing to work 80+ hours per week on unglamorous cost-cutting.”

Candidates can send their resumes to the DOGE account on X.

“Elon & Vivek will review the top 1% of applicants,” according to the post.

In a separate post, Musk said the work will be challenging and won’t be paid.

“Indeed, this will be tedious work, make lots of enemies & compensation is zero,” Musk wrote.

The department’s acronym, DOGE, is a nod to Musk’s favorite cryptocurrency, dogecoin. Trump said the new group will pave the way for his administration to “dismantle government bureaucracy, slash excess regulation, cut wasteful expenditures and restructure federal agencies.”

Trump laid out lofty goals for DOGE in his announcement this week.

“It will become, potentially, ‘The Manhatten Project,’ of our time,” Trump’s announcement said. “Republican politicians have dreamed about the objectives of ‘DOGE’ for a very long time.”

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the group welcomes DOGE to the challenge.

“Given our cumbersome bureaucracy and large fiscal imbalances, the effort is long overdue,” she said. “Regardless of political views, we should all want the federal government to spend scarce dollars wisely.”

MacGuineas said the outside group’s work could help restore trust in the government.

“An aggressive effort to reduce waste, fraud, abuse, and inefficiencies could save billions or even trillions of dollars over a decade and could help improve the public’s faith in government,” she said.

MacGuineas urged DOGE to look at the full budget.

“Such an effort should look at all parts of the budget, especially in the areas of health care, national defense, and spending through the tax code, and it should look beyond just cutting fraud and reducing bureaucracy to also identify places where the taxpayer is not getting the best value for their dollar,” she said. “Federal health care spending, in particular, is rife with overpayments and inefficiencies that offer the opportunity to substantially lower costs without meaningfully reducing quality or access to care.”

Social Security and federal health care programs, specifically Medicare, deserve special attention, MacGuineas said.

Since fiscal year 2003, improper payment estimates by executive branch agencies have totaled about $2.7 trillion, including $236 billion for fiscal year 2023. Improper payments have declined in recent years, but remain a stubborn challenge for many federal agencies. Improper payments are payments that shouldn’t have been made or were made in the wrong amount.

Most of the improper payments come from five federal programs: Medicare, comprising three programs ($51 billion); Medicaid ($50 billion); the Department of Labor’s Unemployment Insurance – Federal Pandemic Unemployment Assistance ($44 billion); the Department of the Treasury’s Earned Income Tax Credit ($22 billion); the Small Business Administration’s (SBA) Paycheck Protection Program Loan Forgiveness ($19 billion).

MacGuineas said DOGE should take a bipartisan outlook.

“Importantly, the process will need to be as bipartisan as possible in order to help with the deliverability and implementation of ideas,” she said. “The recommendations will need Congressional buy-in, further emphasizing the need for this to be an effort reaching across the aisle and leaving all options on the table to address our fiscal imbalances.”

Congress has run a deficit every year since 2001. In the past 50 years, the federal government has ended with a fiscal year-end budget surplus four times, most recently in 2001.

DOGE also plans to go after fraud at the federal level. The Government Accountability Office, which serves as the research arm of Congress, estimated fraud losses cost taxpayers between $233 billion and $521 billion annually, in a report in April. The fraud estimate’s range represents 3% to 7% of average federal obligations.

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