“Every great and deep difficulty bears in itself its own solution. It forces us to change our thinking in order to find it.”
– Niehls Bohr, Physicist & Nobel Prize Winner
As many know, tariffs are more or less a tax set on imported goods (typically at the border). Tariffs can be a sizeable revenue source for the government as well as have an effect on both foreign and domestic business. For international business, and/or domestic businesses that depend on the import of foreign goods, increased tariffs can typically have a negative impact on production since prices to import goods into America go up. However, the positives of tariffs can be more than just increased revenue for the government. Often (or at least optically) tariffs are meant to increase the production of domestic businesses, intending to increase the value of American grown and operated businesses.
This can mean a variety of things for the consumer, and many economists debate the overall effect of increased tariffs on the economy. For one, tariffs can benefits consumers and businesses that depend on domestic goods, since their prices will likely be lower because of the decreased production of overseas goods. However, since international goods are so widespread and essential to many, even domestic operations, there may be some unintended consequences of increased tariffs.
An example of this can be found during natural disasters or states of emergency, more specifically and relevant: hurricanes. It is unknown the exact effect new tariffs have on the damages of current Hurricane Dorian, but some is known about tariffs effect on last year’s Hurricane Florence that hit South Carolina. According to trade economist Jock O’Connell, “people should expect to find it more expensive to rebuild and refurbish their houses.”
Though it is typical that increased demand means a rise in prices, it is believed that recently issued tariffs (10-30% on certain Chinese goods) accelerated this rise of prices to an exorbitant amount. Since many victims of the hurricane were in great need of cheap, accessible building materials, prices and shortages increased causing further disarray.
Kelly D. Scott
The world’s leading business advisory and executive coaching organization