Tariffs are, of course, taxes.
Just the same as other taxes called by different names, such as the Social Security “contributions” workers are forced to make. Changing names does not change the effect.
Assuming the taxes are imposed.
But – as regards the taxes called tariffs – what if they are threatened rather than actually imposed?
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Trump has used the threat of tariffs to coerce foreign leaders to accede to his demands, as for instance that the government of Mexico help staunch the human tsunami of “refugees” across the Southern border. The president of Mexico agreed recently to supply 10,000 soldiers to police the Mexican side of the border after Trump threatened to tax Mexico via tariffs.
The same threat seems to have prompted Nissan to consider shifting production from Mexico to America.
“From Mexico to the U.S., we are exporting a significant number of cars this fiscal year. . . 320,000 units are exported from Mexico to the U.S. and if the high tariffs are imposed, we need to be ready for this,” said Nissan’s CEO Makoto Uchida the other day. “Maybe we can transfer the production of these models elsewhere . . . we will think how we can make it a reality while monitoring the situation.”
This could mean the importation of thousands of manufacturing jobs.
Even more might follow as a result of similar pressure brought to bear on other automakers such as GM and Ford and Stellantis that have extensive manufacturing operations in Mexico.
But while this would be good for America – because it’s a good thing for American workers to be manufacturing things – it’s a crude solution to the underlying problem that’s the reason why so many manufacturing operations have left this country over the past 30 years.
That reason being the cost of manufacturing things in America, which is chiefly a function of regulatory compliance costs.
Two examples come to mind that relate to the cost of manufacturing vehicles. The first is the cost of painting them – in this country. You may remember when you could a decent paint job done for a couple hundred bucks at a MAACO or even Earl Scheib (for less). That was back in the ’90s.
Have you looked into what it costs to get a car sprayed today? A gallon of just the paint costs close to $100 – and it takes about two gallons of paint to spray a typical small car. The paint now costs more than it used to cost to paint the car.
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Then add the cost of painting, which now requires a lot of special – read, expensive – equipment (including spray guns and booths) to comply with the regulations. That’s why it costs thousands rather than hundreds to spray a car. Whether it’s MAACO or Ford that’s doing the spraying. The cost of this is reflected in what it costs to sell a new car – and to respray one that needs respraying (and you pay for that anticipated cost via the cost of the insurance you’re forced to buy).
How about chrome-plating? Seen any lately?
You may have noticed that even six figure cars no longer have chrome-plated metal. Instead, they have chrome-painted plastic. Including under the hood. No more chrome engine dress-up. Just a sheet of ugly black plastic – even if you paid six figures.
Ask someone who owns an older car that came with chrome-plated metal bumpers o engne dress-up pieces what it cost to get those parts re-chromed. There are very few places left in the United States that do chrome-plating work – because of the regulations that have made it too expensive to chrome parts in the United States.
