Tariffs: How We Got Here, and What Comes Next

Trump's tariff strategy ignores cause and effect, and his explanations of it are incoherent at best. The elites around Trump continue to grift off of access to the Office of the President and cabinet positions. If Trump was willing to say “THIS IS A GREAT TIME TO BUY!!! DJT.” on social media just hours before ending the strongest tariffs, then what was he saying to his buddies behind the scenes?

We have to ask what Trump's tariffs mean for him, because that’s what he asks. But I’m more curious about how we got here, and what tariffs mean for Wisconsin.

This is a topic that doesn’t neatly fit on the left-right political spectrum, and I’m curious what your response to this is.

Most of us can remember a time when Wisconsin was a manufacturing leader. Communities like Manitowoc where I grew up, or Janesville, Kenosha, and Milwaukee, had huge factories full of union workers with family-supporting jobs and benefits.

That was before Wisconsin’s manufacturing and agricultural economy was devastated by free trade agreements. Free trade agreements create an uneven playing field where one country can undercut the labor market of the other with fewer worker protections, and production in a less regulated and framework. This causes child labor, sweatshops, and things like lead showing up in kids’ toys.

When Wisconsin’s labor and regulatory framework was undercut by free trade deals like NAFTA, CAFTA, TPP, and many more, Wisconsin businesses outsourced to those other countries, laid off Wisconsin workers en masse, and formerly bustling factories became humiliating blights. They left because it was cheaper to do their work elsewhere.

Free trade agreements therefore lead to trade deficits. A trade deficit means you are importing more than you are exporting. This can happen naturally–say your country doesn’t have cows that make milk and cheesemakers who turn it into cheese, but your compatriots really love cheese. You have to import a lot of cheese. Your hope is you can export enough widgets to offset the loss of your money to the cheesemaking country, or eventually you become unable to get enough cheese because your buying power is diminished.

Wisconsin’s resulting state economy is still a combination of agriculture, manufacturing, tourism, and very slow growth in everything else. The five-year growth in our GDP ranks us 46th in the country. We’re in “uh oh” blinking red light territory. Our economy can’t take any more hits!

So what do we do?

Trump’s “response” was to impose tariffs on imports from other countries. He started small with certain goods, then expanded to include goods from Canada and Mexico, and later from China. He eventually expanded to countries and regions so vast that he even included islands populated only by penguins. He did immense harm to the economy and our trade relations around the world. But then he paused his tariffs for 90 days.

What is a tariff? It’s a tax paid by the importer on goods coming to America from other countries. Here’s how it works:

Say I am the owner of Bare’s Coffee Shop in Verona, Wisconsin.

I purchase a bushel of coffee beans from a Colombian farmer via Ryan Bros. Imports Inc., valued at $1,000, and I want Ryan Bros. Imports, Inc. to deliver it to Bare’s Coffee Shop.

Say America has a 25% tariff on Colombian goods.

Because paying tariffs is complicated, Ryan Bros. Imports, Inc. likely hires a customs broker to calculate and pay the tariff to the United States Customs and Border Protection. That broker can accept upfront payment or a credit payment to pay it back later with interest. Either way, costs are added.

Once the $250 tariff is paid, the coffee beans may leave the Ryan Bros. Imports, Inc. warehouse.

By the time I pay the $1,000 cost, shipping, $250 tariff, interest and fees to the broker, shipping and handling, that $1,000 bushel costs… a lot more than it did last year!

The only part of that exercise with significant public policy implications is the 25%/$250 tariff. What will I do with that increased cost to me? I will pass it on to the customer ordering a 16oz. Colombian dark roast. Last year it was $2.75. This year it’s $3.50.

Are tariffs always bad? No. It can be used to protect a market we have. Cheese is a good example. America could put a tariff on Ireland if Irish dairy farmers flooded America’s grocery stores with cheap Irish cheddar cheese produced in unsafe conditions by slave laborers. That would protect our cheese producers and consumers.

Are they how we fix unfair trade deals? No. During the current 90-day pause on tariffs, Trump could try to renegotiate those deals. He did some of that during his first Administration, but not in a transformative and comprehensive way.

Trump’s tariff “strategy” is already negatively affecting the Wisconsin economy and the livelihood of small business owners. For example, Will Hsu the owner of Hsu Ginseng in North Central Wisconsin said about his company’s ginseng production:

“I have customers who are canceling orders now for ginseng coming from the US…They can source (ginseng) from Canada or from domestic production in China much cheaper than they can source it from the United States.”

Trump’s policies are hurting our economy.

Trump’s tariffs force an urgent but straightforward question on us in state government: Do we seize this moment to invest in the people of Wisconsin, or do we follow Trump’s disastrous economic policies? Republicans here have been copying and pasting Trump policies. This week they had a session day–the only one this month–during which they passed several bills to weaken Wisconsin’s unemployment system. They couldn’t have chosen a worse time.

Whether it’s tariffs, slashing Medicaid, or cutting support for low-income families, Trump’s economic agenda spells disaster for working people across all 50 states. Here in Wisconsin, we don’t have a magic wand to solve this for him. We can’t simply pass a tax credit that cancels out the extra $0.75 you’ll now pay for your coffee, nor can we replace the billions we stand to lose in Medicaid funding.

But we can, and will do our best to fight back. Right here in Wisconsin, we’ve proposed historic investments in childcare, K-12 and higher education, tax cuts for working people (the ones who will feel these tariffs and cuts the hardest), and investments in our economy to create good-paying jobs.

While Trump wrecks the economy and continues to work to make the rich richer, we can chart a better course. We can reclaim our legacy as the progressive beacon that other states once looked up to–and we can do it by putting people first.