Sound and Fury: U.S. tariffs backfire as protests rage

While the U.S. government is roiling the world with tariffs, it is ordinary Americans, especially low-income households, that will be disproportionately affected.

by Xin Ping

Furious protesters have rallied across all 50 U.S. states, honking horns and chanting "Hands Off!" in response to Washington's erratic trade policies, especially the on-again, off-again tariff hikes.

The swirl of uncertainty surrounding these tariffs has sent the stock market on a roller-coaster ride, leaving small investors anxious. The Cboe Volatility Index, Wall Street's "fear gauge," has hit an all-time high since the COVID pandemic as investors fret about the fallout.

Apart from the stock market, higher prices at grocery stores await U.S. consumers. As a tariff tsunami is on the horizon, the prices of imported goods will creep up, for importers will pass their higher costs on to customers. Retail giants like Walmart, squeezed by shrinking profit margins, asked Chinese suppliers for discounts -- only to be rebuffed. The cost of U.S. protectionism is not to be paid by Chinese companies. Whoever started the whole thing should face the consequences.

While the U.S. government is roiling the world with tariffs, it is ordinary Americans, especially low-income households, that will be disproportionately affected. Yale University's Budget Lab estimates that fresh produce prices could jump by 4 percent, with overall food costs rising 2.8 percent. While wealthier Americans rush to buy big-ticket items such as luxury cars -- now subject to sweeping tariffs as well -- lower-income families are stockpiling essentials, fearing empty shelves.

The irony cuts deeper as some U.S. media outlets cheer "faster inventory turnover" in supermarkets, turning a blind eye to the anxiety gripping America's working class. No wonder the nationwide fury.

A FLAWED FORMULA AND A BIG LOSS

America's tariff calculations make no sense. The method is said to account for trade deficits, non-monetary barriers and currency manipulation. Yet all it did was dividing the U.S. trade deficit by a country's exports to America. Many key economic factors are missing, and the amateurism is glaring.

Math aside, these tariffs are a bad idea. No short-term gains are worth the long-term damage.

The United States may have three Rs in mind with these tariffs: revenue, restriction and reciprocity, according to economist Douglas A. Irwin, who argues in Trade Policy in American Economic History that tariffs are levied to "raise revenue for the government, to restrict imports and protect domestic producers from foreign competition, and to reach reciprocity agreements that reduce trade barriers."

These are unattainable goals.

Higher business costs and inflation will strain government finance. U.S. manufacturers struggle to secure affordable supplies elsewhere, leaving them stuck in squeezed supply chains. And Washington's zero-sum logic is completely at odds with reciprocal arrangements.

Instead of the 3Rs, America will get one big L: Loss for the government, businesses and the people. Stagflation -- stagnant growth plus inflation -- is the only destination.

WASHINGTON MUST CHANGE COURSE

The world isn't taking this lying down. China and the European Union have announced retaliatory tariffs -- a defensive move. Together, China and the EU account for about 42 percent of global trade according to WTO data for 2023, dwarfing the U.S. share of 13 percent. A full-blown trade war would be disastrous for Washington.

After a phone call with Chinese Premier Li Qiang, European Commission President Ursula von der Leyen called for a "negotiated resolution" to provide "stability and predictability" for the global economy.

The United States must abandon its self-destructive tariff crusade before it drags the global economy deeper into chaos. The world needs cooperation, not confrontation. Washington's recklessness hurts everyone, including itself.

Editor's note: Xin Ping is a commentator on international affairs, writing regularly for Xinhua News Agency, Global Times, China Daily, CGTN, etc. He can be reached at [email protected].