¿Qué saber sobre las tarifas de Trump y dónde se destinará el dinero?

Announcing what you called «Mutual Tariffs,» Trump has fulfilled a key promise of his campaign by increasing U.S. taxes on foreign goods to reduce the gap with rates that, according to the White House, unfairly impose on American products.

Trump’s higher tariffs would hit foreign entities that sell multiple goods in the United States more than they buy. However, economists do not share Trump’s enthusiasm for tariffs, especially since they are an import tax that generally impacts consumers. Nevertheless, mutual tariffs could bring other countries to the table and obtain import taxes.

Will the high tariffs be allocated to the General Revenue Fund?

Tariffs are charges on imports, collected when foreign goods cross the U.S. border by the customs and border protection agency. The money, around $80 billion (€72 billion) last year, goes to the U.S. Treasury to help pay for federal government expenses. Congress has the authority to decide how the money is spent.

Trump, mainly supported by Republican lawmakers who control the U.S. Senate and House of Representatives, aims to use tariff revenue for financial tax cuts. This, according to analysts, would disproportionately benefit the wealthy.

More specifically, they will extend approved tax cuts from Trump’s first term, which mainly expire by the end of 2025. The Tax Foundation, a non-partisan Washington-based think tank, concluded that Trump’s tax cut would reduce federal revenues by $4.5 trillion (€4.1 trillion) from 2025 to 2034.

Trump wants to increase rates to offset lower tax revenues. Another group of experts, the Tax Policy Center, said that expanding the 2017 tax cuts would provide continuous tax relief for Americans at all income levels, «but households would receive a larger benefit.»

When will prices rise as a result of tariff policy?

It depends on how companies respond both in the U.S. and abroad, but consumers could see prices rise overall one or two months after tariffs are imposed. In the case of products like those from Mexico, prices could increase much more rapidly after tariffs.

Some U.S. merchants and other importers could absorb some of the costs of tariffs, and foreign exporters could lower prices to offset additional tariffs. But for many companies, the rates Trump announced on Wednesday, such as the 20% on imports from Europe, will be too high to swallow alone.

Companies may also use tariffs as a reason to raise prices. When Trump slapped tariffs on washers in 2018, subsequent studies showed that merchants increased prices of washing machines and dryers, even though there were no new tariffs.

A key question in the coming months is whether something similar will happen. Economists are concerned that consumers, who have just experienced the highest inflation rate in four decades, are more accustomed to price increases than before the pandemic.

However, there are also indications that Americans, dismayed by the rising cost of living, are less willing to accept price increases and may simply reduce their purchases. This could discourage companies from raising prices.

What is the limit of the executive’s power to apply tariffs?

The U.S. Constitution grants Congress the power to establish tariffs. Over the years, Congress has delegated these powers to the president through various laws. These laws specify the circumstances under which the White House can impose tariffs, which are usually limited to cases where imports threaten national security or severely harm a specific industry.

In the past, presidents typically imposed tariffs only after public hearings to determine if certain imports meet these criteria. Trump followed these steps in imposing tariffs during his first term.

In the second term, Trump attempted to use emergency powers established in a 1977 law to impose more ad hoc tariffs. For example, Trump said that the flow of Fentanyl from Canada and Mexico constitutes a national emergency and used this pretext to impose 25% tariffs on goods from both countries.

Congress can try to cancel an emergency situation declared by a president, and Democratic Senator Tim Kaine of Virginia proposed doing so for Canada. This law could be passed by the Senate but would likely fail in the House of Representatives. Other congressional bills that would also limit the president’s authority to set tariffs also have a good chance of being passed.

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What tariffs do other countries charge for U.S. products?

U.S. tariffs are usually lower than in other countries. According to the World Trade Organization, the average U.S. tariff, weighted to reflect the goods actually traded, is only 2.2%, compared to 2.7% in the European Union, 3% in China, and 12% in India.

Furthermore, other countries tend to do more than the U.S. to protect their farmers with high tariffs. The weighted U.S. tariff on trade in agricultural products, for example, is 4%, compared to 8.4% in the EU, 12.6% in Japan, 13.1% in China, and 65% in India.

The WTO figures do not include recent taxes or Trump’s import rates among countries that signed their own free trade agreements like the agreement between the U.S., Mexico, and Canada, which allows many products to cross borders without U.S. charges.

However, the Trump administration used its own calculations to reach much higher rates which, according to them, other savings impose on the U.S. For example, the White House said on Wednesday that efficient EU tariffs on the U.S. are 39%, well above WTO figures. According to the White House, China’s rates are equivalent to 67%.

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Previous U.S. administrations agreed to tariffs that Trump now describes as unfair. These were the result of a long negotiation between 1986 and 1994, such as the «Uruguay Round,» which culminated in a trade pact signed by 123 countries that formed the basis of the global trading system for almost four decades.