LAFAYETTE, La. (KATC) — New tariffs are set to go into effect for nearly all goods imported into the United States following President Trump's announcement during a Rose Garden speech Wednesday, a day he has dubbed 'Liberation Day.'
These tariffs are planned to start at 10 percent, with higher rates for countries with large trade deficits, such as China and Mexico. In addition, a 25 percent tariff will be placed on foreign-made cars and parts. Trump's argument is that these measures will benefit American workers by helping to shrink the national debt, raise billions of dollars, and encourage growth in the gross domestic product (GDP).
Trump also suggests a potential tax deduction for Americans who purchase U.S. cars in an effort to jog domestic consumption. Meanwhile, economists are warning that lower- to middle-income households will bare the financial brunt of these changes. Not to mention, major stocks have seen significant drops since the announcement.
Still, questions remain as to what this means for the average Joe and what will come out of their pocket.
That's why we took things local and paid a visit to the University of Louisiana at Lafayette to speak with economics professor Dr. Bill Ferguson, PhD, about the history of tariffs in the U.S. to get an idea of what things could look like moving forward. We started with the basic question: What is a tariff?
"A tariff is essentially a tax that is levied on goods that are coming in from another country," Ferguson, with more than 30 years of experience tracking and teaching economics, said. "These tariffs can be levied for a variety of reasons, usually revenue generation."
Tariffs can also be levied for reasons such as protecting domestic industries, trade negotiations, retaliation, and national security. However, the last time many of us learned about tariffs was probably back in school when we learned about the Boston Tea Party back in 1773.
"If you're buying British tea, you know you paid the tax and the cost was born by the consumer," Ferguson told us. "And it's always ultimately born by the consumer, 'cause even if it's posed and the producers pay taxes, they pass those costs along to the consumers, so ultimately the consumer is going to be paying the cost."
For that average Joe, that doesn't sound like very good news — but this is not a new concept. Tariffs were the way the federal government raised money for America's first 125 years or so, according to Ferguson. That is, until we had income tax law passed by Congress on July 2, 1909, before being ratified on February 3, 1913 as the 16th amendment. More recently, Ferguson said the hey-day of tariffs was really the Great Depression Era. We asked him if he thought that was telling of where we stand economically today.
"It doesn't bode well for our current situation, because again, the taxes, the tariffs that are imposed can be imposed at different levels of the production process and they could be imposed unilaterally on one country versus another," Ferguson said.
So, to answer the question in the headline: No, not quite like this.
To read more about President Trump's tariff plan, click here.
