For every government raising money is a necessary aspect to keep functioning. In the US, income tax came into 1913, partly to pay for WW I as military expenditures are both necessary and expensive, which has not changed in this century. Everyone wants the other person to pay their full share, but less for them. Raising income tax levels for both individuals and corporations is going to lead to many questions and fewer votes. Governments then look for other methods to raise money, and President Trump has seized upon tariffs.

Tariffs are paid by the importer, which means an extra cost which means higher costs for the end user. Essentially tariffs are taxes, but if a company cannot add the entire tariff to the price then the company has to pay the tariff from its margins or makes less money.

In an article by Andrew Duehren of the New York Times News Service, custom duties including tariffs have generated $152 billion in July, roughly twice as much when compared to a year ago in July of $78 billion.

President Trump has commented on Truth Social Media that tariffs are bringing in billions of dollars to the US and it was a good thing.

Joao Gomes, an economist at the U of Penn’s Wharton School believes the money could be addictive. It will be very hard to turn away when the debt and deficit are what they are.

President Trump has long fantasized about replacing taxes on income with tariffs. The tax cuts in the latest Republican bill moves the US away from taxing earnings and toward taxing goods.

The issue is who benefits the most and it tends to the rich the most. The reason is lower-income Americans spend more of their earnings on those more expensive goods or the ones with tariffs. meaning the tariffs amount to a larger tax increase for them compared to richer Americans.

Tariffs have begun to bleed into consumer prices both because of the tariffs and for domestic companies matching the higher imported prices to raise their margins. Clearly prices are not going down.

Linking to dividend paying stocks, clearly any company which was importing goods has to pay more for the goods and the need then goes to passing on higher prices to the end user. While there are significant advantages in using imported goods, the issue is how high must the tariff be before it is less expensive to do the work in the US. A 15% tariff or less is likely manageable, but we will see in the coming months because most imported goods have a time delay for the logistics to work their way into the system.

There are more questions than answers, till the next time – to raising questions.