American Thinker

by John F. Di Leo

    Democrat activists hope to make the 2026 elections all about President Trump’s tariff policy, which is understandable, considering how unpopular the Democrat party’s own platform has become in recent years.

    But there are a lot of misunderstandings about international trade, so let’s take a look at a few of them as Election Day approaches.

Q: What are duties and tariffs

    A: Most countries assess taxes on most goods coming in from other countries. There’s a basic import duty, usually a percentage of the overseas vendor’s sale price, and then there are sometimes other tariffs on top of that. The two terms are used almost interchangeably; in the USA, the basic duty, which is commodity-based, ranges from zero to about twenty percent, and usually averages around 5 percent. Most of the other taxes on imports are usually just called tariffs.

    These are almost all “ad valorem” (percentages of value), based on the price that the USA importer pays to the foreign exporter. Generally, the USA charges lower duties than most other countries. President Trump has not changed our duty rates at all; he has focused on implementing additional tariffs to protect our manufacturing sector, especially against China.

Q: But aren’t these 20-percent, and 30-percent, and 50-percent tariffs huge hits to the American consumer

    A: Well, they would be, if the consumer were paying such high rates. But the consumer doesn’t pay that kind of money. Let’s remember how duties and tariffs are crafted.

    Picture an American company that designs a product — like a washing machine or power drill or vacuum cleaner — and then selects a Chinese contract assembler to make it.

    If you hear that the tariffs on these Chinese products are 30 or 40 or 50 percent, you’re being led to assume that’s a third or a half of the price you’re paying when you buy the item at Walmart or Home Depot or Best Buy. But it’s not. It doesn’t work that way.

    The American importer is paying that 30, 40, or even 50 percent on his wholesale price to the Chinese vendor. He then brings it to his U.S. warehouse, and resells it to that U.S. big box chain, delivering it to the chain’s distribution center. Then the chain ships it to the retail store where you shop.

    If your retail purchase price is $200, the Chinese contract manufacturer probably got just $50 for it, and that’s the price that the tariffs were assessed upon. So the 30, or 40, or 50 percent is on the $50 wholesale price, not on the $200 retail price in the store.

    The press gives us the impression that when we buy something at the store for $200, almost half of that is Trump’s tariffs. Nothing could be farther from the truth. The tariffs are usually a sixth, or an eighth, or even a tenth of the retail price you’re paying at the store.

    The difference between the Chinese cost of the product and the retailer’s total sale price to you is all the other things that go into modern commerce — the design engineering, transportation and distribution, advertising, retail service, etc. That’s why the tariffs haven’t been as inflationary as opponents (who don’t understand international trade) had predicted.

Q: But if tariffs are a smaller piece of the consumer good than we’ve been given to believe, then why bother with them at all

    A: Because the tariffs aren’t really in place to alter your purchasing decisions. They’re there to alter that first U.S. company’s purchasing decision.

    For that first company, the importer, it is a substantial amount — substantial enough, hopefully, to change his behavior.

    Let’s say a company is trying to decide between hiring a U.S. contract assembler to make a product for him and hiring a contract assembler in China. Maybe the Chinese company will do it for $50, but an American company would charge $70.

    Well, $50 is cheapest, so the American company is tempted to go with the Chinese vendor at first, tolerating the slow transportation and long lead times of buying from China because of the apparent savings. That’s how we lost so much manufacturing over the past 40 years.

    But add another 40 percent in tariffs on Chinese goods, and the $50 Chinese product now costs him $70. That 40-percent tariff has made a switch to the American contract manufacturer cost-effective, creating the manufacturing jobs here in the United States instead of creating jobs in China.

    This is the primary goal of the Trump tariff policy: to change the cost-benefit analysis for American businesses from being encouraged to outsource purchases to China, and to instead be encouraged to re-source those purchases to fellow American companies.

    It does take time to develop new American sources. It took us a century to gradually lose so much of our manufacturing capacity to the Third World. It’s not going to all come back in four years.

    So there is pain in the meantime, but federal tax and regulatory reforms (such as those in the Big Beautiful Bill of 2025) are making the development of new American manufacturing options possible more quickly. The differences in such growth in red states versus blue ones is significant, as blue states remain hostile to industry and employment.

Q: What about the claim that other countries’ tariffs are lower than ours, so the “reciprocity” claim is untrue

    A: Oh, tariff barriers are far from the worst barriers in international trade. Non-tariff barriers are the real enemy.

    Try exporting an American-made appliance to Europe, for example. You need to hire a European “Authorized Representative” and submit each model for expensive C.E. or UKCA testing and approval, and mold that mark and code into your product, and reprint your packaging to include the name and contact info of the importer and distributor in each country, and redo the marking every couple of years as they change packaging and recycling declaration requirements — costing tens of thousands of dollars, if not hundreds of thousands — before you make your first sale.

    Such regulatory barriers keep American businesses from even trying.

    We Americans don’t believe in such unfair restraints on trade (outside seriously risky products like some medications and foodstuffs), so we are reciprocating with tariffs that are far more predictable and fair.

Q: Is the difference really worth it  So what if the Chinese are paid relatively little, and we’re still making money on engineering, transportation, warehousing, and advertising over here

    A: Well, there’s the national security side of it, to start: China is our biggest enemy on Earth, constantly threatening our allies like Taiwan and other neighbors while supplying and supporting Iran, North Korea, and our other enemies. Funding Chinese factories is the same as funding China’s war machine. And depending on China instead of being self-sufficient puts us in severe danger when that war inevitably comes.

    But there’s also the commercial side of it: China manipulates its currency, practices slave labor and child labor, and steals our intellectual property. American companies that hire Chinese assemblers soon discover knockoffs popping up everywhere. Stop outsourcing to China, and you have fewer knockoffs to compete with.

    Most important is the employment side of it. The American middle class was built on factory jobs — the foundries, stampers, molders, and assemblers, the companies that transform metal ore and plastic resin into machines, tools, appliances, clothing, housewares, and everything else that completes our standard of living.

    Outsourcing manufacturing to the Third World may allow some desk jobs and warehouse jobs to remain here — engineers and call centers, accountants and advertising agencies — but it kills most other routes to a middle-class life. With factories, people lacking college degrees can start on the assembly line as the first rung of a career path, moving up to tool and die maker or engineer, quality control or foreman, or moving from the plant into the office.

    Only with the return of the American factory environment can America’s employment range — and the broad path to the American dream — become complete again.

    That’s the real goal of the Republican tariff program. The question voters should be asking is, “Why on earth are Democrats so opposed to this goal ”