As President Donald Trump’s tariffs take effect across the United States, Pitt economists say they could have negative impacts on the prices of local goods.
After the 90-day tariff pause Trump instated on April 9 expires, tariffs could raise costs on foreign products and predicted that Trump’s policies could cause a recession, economics professors said.
As of April 21, there is a 90-day 10% flat tariff in place for all countries, as well as a tariff rate of 145% on China. According to CBS News, electronics, clothing, shoes, jewelry, alcohol, furniture, coffee beans and chocolate imports will be affected.
Jack Ochs, professor emeritus of economics at Pitt, described tariffs as “a tax levied on some class of goods that are sold by an exporter in one political jurisdiction to an importer in the jurisdiction that levies the tariff.”
“A tariff creates a wedge between the price paid by the importer and the price received by the exporter,” Ochs said. “The distribution of the economic burden of the tariff depends on how both the price to the importer goes up and how much the seller receives goes down.”
Ochs said there are numerous reasons as to why a country will impose a tariff, including “revenue and ease of collection.”
“Governments need revenue, and tariffs are easy to collect, since they can be collected at the port of entry,” Ochs said. “By contrast, income is generated by transactions made everywhere and requires the ability to collect or at least identify.”
Ochs said Trump’s economic policy insinuates that “exporters will reduce their prices by the full amount of a tariff imposed,” which will not burden importers and businesses at the border.
“[Trump] believes that it is foreigners who will bear the burden imposed by the United States on any goods they export to the United States,” Ochs said. “As an empirical matter, that has not been true of the tariffs on Chinese goods imposed by our government in President Trump’s first term in office.”
During his first term, Trump imposed tariffs that primarily targeted imports from China and global goods such as steel, aluminum, washing machines and solar panels. According to the Wall Street Journal, tariffs imposed on these items made them unaffordable for American consumers and did little to support the economy.
When tariffs are implemented in the economy, the tariff tax is imposed on U.S. customers more heavily than on importers. According to CNN, unlike larger corporations, small businesses have less flexibility to absorb the higher costs of tariffs. Carey Treado, an associate teaching professor of economics at Pitt, explained what tariffs are and how they work.
“[Tariffs] are a tax on American businesses and consumers who purchase non-American goods,” Treado said. “They also reduce our purchases from foreign countries, and so foreign countries retaliate because they see it as restricting access to our market. And so our exports also decline, and business shrinks.”
Global tariffs could impact operations at Pitt as well. Maggie Weaver, senior marketing director for Pitt Eats, said Pitt is doing the best it can to combat price surges in food.
“We are committed to minimizing price increases and, in partnership with our purchasing teams, actively negotiate with manufacturers to secure the best possible pricing,” Weaver said. “This allows us to pass on savings to our guests while maintaining the high quality and service they expect and deserve. We continue to monitor industry trends and adapt our strategies to provide students with accessible and affordable dining options.”
According to Yale University’s Budget Lab, Trump’s tariffs will cause food prices to rise 2.8% overall, including 4% for fresh produce. The United States’ largest agricultural exporters are Mexico and Canada. Mexico supplies approximately one-third of U.S. horticultural product imports, such as fruits and vegetables, whereas Canada is a large supplier of processed foods, meat and vegetable oils.
“Any products that are imported will be charged a sales tax called tariffs. So anything that comes across the U.S. border, like when you go to the store and you buy something and there’s a 7% tax when you pay for it, that’s what will happen at the border,” Treado said.
Treado referenced the Smoot-Hawley Tariff Act in 1930 as an example of a major tariff policy in American history. Treado and many economists believe the act is why the Great Depression lasted so long. According to CNBC, the tariff rates under Trump will be greater than the Great Depression levels.
Although Trump claims the intended goal of his tariffs is to benefit Americans, many economists, including Treado, believe the plan will lead to another recession.
“Most economists think that tariffs cause more economic loss than economic benefit,” Treado said. “So very little economists recommend that as a policy.”
Treado said the constantly changing tariff rates make it difficult to make an exact prediction on the short-term and long-term economic effects and added that the Tax Foundation, “a nonprofit organization that tries to estimate the impact of any tax on the economy,” estimated a loss of 600,000 jobs due to Trump’s tariffs.
This article was updated to clarify and more accurately represent Carey Treado’s comments about how tariffs work, their impact on the economy and the historical significance of the Smoot-Hawley Tariff Act. The Pitt News regrets these errors.