University of Utah economic professor explains goal of tariffs

SALT LAKE CITY — The White House has confirmed that tariffs will take effect on Saturday. President Trump has proposed a 25% tariff on imports and an additional 10% duty on China. 

The White House has not said if there will be any exceptions to imports.

University of Utah professor of economics and adjunct professor of law Mark Glick spoke to KSL NewsRadio to answer all our burning questions about tariffs. 

Listen to the full interview between Glick and KSL NewsRadio’s Jessica Lowell. 

 

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KSL NewsRadio has modified this interview transcript for brevity and clarity.

What is a tariff?

Glick: A tariff is basically a tax that the government places on imported goods. 

What President Donald Trump is suggesting to happen with tariffs

Glick: Well, it’s not really clear what he’s suggesting completely, but he’s suggesting that there should be more tariffs. And I tend to agree with him because a tariff is paid by American citizens, it’s not paid by foreign countries.

However, the purpose of the tariff is to protect our manufacturing sector. And we’ve lost millions of jobs in the manufacturing sector to foreign competition. 

This has hurt sectors of the country where a whole small town could be based on one particular manufacturing plant. Once that plant is gone, all of the different businesses that are dependent on the plant and the tax base of that town is injured. That can have devastating effects on people.

Where they go from there is usually to worse jobs. Like maybe in the informal sector or they go to work for Uber or Amazon Logistics or hospitality, the service sector where wages are lower. So that’s the negative impact from free trade that tariffs are meant to protect or prevent.

Will the tariffs make things more expensive?

Glick: Yes, tariffs are not going to lower prices. They’re going to raise wages. That’s the idea. They’re going to reduce inequality.

There’s groups in our country that have really been harmed because of the undermining the manufacturing. I mean, there’s one study that shows that between 2001 and 2018, Utah lost 2.4% of their jobs to Chinese import.

So it’s not a mechanism to reduce prices. It’s a mechanism to protect workers, to protect good manufacturing jobs, so non-college-educated folks can get high-paying jobs.

But on the flip side, it will probably have some effect of raising prices.

Will prices immediately change on Feb. 1?

Glick: It should be pretty fast because firms might just anticipate there’s going to be a higher price and just start to change their prices rather quickly.

Again, the best protection for that is a lot of competitors. If one competitor is going to raise their price and another competitor says, “Well, I’m not going to do that immediately. I’m going to try to take your customers.”

You see what I mean? It’s its competition that really matters for the ability to raise prices.

Do you think the brunt of this is going to go to the consumer?

Glick: When there’s an increase in cost for all the competitors, there’s going to be some increase in price. And it really depends on the elasticity — supply and demand — how much is passed on.

But if you want the least amount of cost passed on, then you need domestic competition. 

Competition aspect of tariffs

Glick: If you want to lower prices, you need more domestic competition. The tariffs can help us move up the value chain and develop like really high-end, you know, world-class industry.

But on the other hand, if you’re removing foreign competition, you got to replace that with domestic competition. So we want to really enforce our antitrust laws. So those go hand-in-hand.

We want strong domestic competition. I mean, if you talk to farmers in the United States, they really have like only one place to sell their products, like one company. We only have a couple of people producing milk.

If you go through the various products there’s fewer and fewer competitors.

That really is detrimental and can, if you want to control inflation, you need much more domestic competition and you need to develop supply chains. So there’s no disruption of supply chains. So that we don’t have a reduction in supply, which can cause inflation as well.

Is four years enough time to develop everything to see it to fruition where prices do eventually kind of level out?

Glick: Well, that’s a good question. I don’t know if I know the answer to that.

But I think both Democrats and Republicans are interested in bringing a lot of the supply chains home.

So when we have problems like when we had COVID that we’re not completely dependent on one part coming from another country that’s impossible to get to develop our ports.

That’s something that [former] President Biden is doing. And also the Chips Act was also meant to bring some the computer parts and so forth bring it home. And hopefully, President Trump will continue to support those efforts.

Biden kept many of the tariffs that Trump instituted in its first term.

So, I’m hoping that this will be done in a kind of a smart way, whether it’s President Trump, whether in four years it’s another administration, that we combine tariff that protect our best industries that we do that coupled with domestic competition and we support our antitrust law and we support when workers are displaced, then we have a much better system to move them to higher quality jobs.

Is Trump promising more antitrust laws, or more things to encourage that competition?

Glick: He’s appointed new leadership to the Federal Trade Commission and the Anti-Trust Division of the Department of Justice. And those people are basically still pro-domestic competition.

So he has not appointed people who want to dismantle the antitrust laws, which I think is really good.

Now what they do, we’ll have to see. But the initial announcement and what I’ve seen them say is that they’re going to continue to try to enforce the antitrust law.