Tariffs, Cars, and the Whiskey War
Donald Trump wants to bring manufacturing jobs back to America, which he has said he’ll do if elected by imposing tariffs on goods such as vehicles made outside the United States. This, Trump believes, will negate the cost-of-labor savings of things imported into the United States. This could bring back jobs — but it is likely to increase costs, because the car companies have to pay the cost-of-labor in the United States as well as the costs of regulation, which is arguably more responsible for making it expensive to manufacture anything in the United States.
The tax revenue not collected on imported whiskey … would either be made up by some other tax, or it would be added to the deficit.
Ford, General Motors, and Stellantis — which all make trucks just across the border in Mexico — do not have to deal with the federal OSHA, EPA and other apparats that may make the workplace safer and cleaner in the United States but also more expensive. Unless Trump plans on cutting the cost of complying with these regulations — perhaps by insisting that any new regulations proposed be subjected to cost-benefit analysis and voted on by Congress before they’re imposed — it would not be necessary to impose tariffs on vehicles or anything else manufactured outside the United States.
American-made vehicles might actually become less-expensive to make here because it would not be necessary to manufacture them elsewhere, which increases the costs to the buyer who gets stuck paying shipping costs. It’s possible imported vehicles would also cost less than they do now, too — because their manufacturers would be forced to adjust their prices to be cost-competitive with American-made vehicles. (READ MORE from Eric Peters: Birth Control Seats)
The Tariff on Booze
Then there’s booze — specifically, American bourbon and Irish whiskey.
One’s made here, the other there. But they’re often made or imported by the same international liquor company. It’s a very profitable business. Especially when you can avoid paying taxes — tariffs and duties — on the whiskey made in Ireland that’s imported to America.
That’s what’s being pushed right now — just ahead of the election — by lobbyists for the international liquor distributors. They want to amend something called the Harmonized Tariff Schedule in such a way as to allow Irish whiskey to have a tax advantage over American-made bourbon that opponents say would not lower the cost of either — but would end up costing American taxpayers billions.
The technicalities are extremely arcane. H.R. 4073 — the Duty Drawback Clarification Act — would establish a “uniform 8 digit subheading” for all imported whiskey that would make it effectively interchangeable, for tax/tariff purposes, with domestically produced bourbon. That would allow importers of Irish Whiskey to not pay the tariffs/duties that would otherwise apply.
Under current tariff schedules, domestically produced bourbon and imported whiskey each have their own, separate schedules that cannot be interchanged. That means imported Irish whiskey is subject to the tariff but domestically produced bourbon is not. The latter is currently (usually) less expensive for exactly that reason.
What H.R. 4073 would do is eliminate the distinction in the tariff schedule, which would disadvantage American made bourbon in terms of what it costs relative to what imported Irish whiskey costs. The latter might sell for less, if the importer lowers the price to reflect the lower (or no) taxes. This would make it easier to sell it relative to American-made bourbon, just the same as it’s easier to sell a less expensive imported car that costs less to sell because it costs less to make somewhere else than to make it here.
But what if the importer doesn’t lower the price?
Who benefits, then?
The importers of Irish whiskey, who effectively pocket the savings in tariffs/taxes they would otherwise have had to pay. If they don’t have to pay the tariffs/taxes and don’t lower the cost of the whiskey, they’ll make a lot more money.
At the expense of the American taxpayer.
That’s the major argument against the proposed change in the Tariff Schedule; i.e., that a tax not paid is one that will inevitably be paid by someone else. The federal government is not in the charity business. The tax revenue not collected on imported whiskey — a sum amounting to several billions over a ten year period, according to opponents of the proposal — would either be made up for by some other tax or it would be added to the deficit and then everyone would pay, in the form of the raising the cost of servicing the debt.
The liquor importers who stand to reap the benefits have plenty of money to spend on lobbying, of course — liquor sales being one of the highest-margin businesses there is. And with the election less than two weeks away, there has been almost no attention given to this issue. (READ MORE: Unions Threaten American Jobs By Opposing Nippon–US Steel Deal)
The ideal reform, of course, would be to level the playing field for all. Then everyone benefits from the lower cost of everything, as opposed to some interests benefitting from their carving out special exemptions from the costs of government that everyone else ends up paying for.
Whether for cars — or Irish Whiskey.
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