For decades, Toledo, Ohio was the glass capital of the world. If you wanted a specific type or shape of glass that everyone else said was impossible to make, the glassmakers in Toledo would figure out how to make it.
In the early 2000s, the Toledo Museum of Art decided to add a new wing: the Glass Pavilion. The add-on would not only serve as a museum of glass art, but it would be a work of art itself, built from long, curving glass panels.
There was just one problem: by the early 2000s, so much of America’s glass manufacturing had been outsourced overseas that no company in Toledo had the capability to make the panels. And that is why If you decide to pay a visit to the Toledo Museum of Art Glass Pavilion, a monument to Toledo’s rich history of innovation, you will find yourself surrounded by glass panels made in Shahe, China, the new glass capital of the world.
I first read this story back in 2006 when the Glass Pavilion opened its doors. It’s been rattling around in my head ever since. It’s the perfect allegory of America’s shift from the post-war era into the global marketplace of the modern era. If you put it in a movie, critics would say it was too on-the-nose.
All of this leads us into the exciting world of tariffs.
I realize that at this late date, talking about how tariffs work is a bit like a surgeon telling a woman that while he couldn’t save her husband, he CAN tell her all about the species of bear that mauled him to death. Nevertheless, the form of the Destructor has been chosen, so let’s talk tariffs!
A tariff is a tax on the import or export of goods between countries. Tariffs aren’t a bad thing — in fact, they can be quite useful! But like any tool, they have to be used with care and precision.
It’s true that President Joe Biden introduced some new tariffs while he was in office. A good example of this is his 100% tariff on Chinese electric vehicles. The premise of the tariff is that Chinese automakers are able to flood the market with low-priced EVs that would unfairly compete with domestic EVs, and the tariff is designed to discourage that.
Is that good or bad? It’s good if you have a job in the U.S. auto industry; it’s bad if you want to buy a cheap Chinese car in the U.S. But what’s important to note is that Chinese auto manufacturers are not the ones being taxed. U.S. consumers are the ones being taxed — or, at the very least, being forced to buy a more expensive domestic product rather than a cheaper foreign product.
That’s all well and good if the domestic product actually exists. It becomes a problem when it doesn’t.
Let’s take a look at one of the most American products you can possibly buy: a pickup truck.
Every Ford F-150 is assembled in either Dearborn, Michigan or Kansas City, Missouri. However, the components that make up an F-150 come from all over. Most of the engine options are made in the U.S., but the 3.5 liter EcoBoost power plant is made in Mexico. According to Ford, 50 percent of the components in an F-150 are made in the U.S. and Canada; what percentage of those parts are made in which country is less clear, and which countries the remaining 50 percent of parts come from is also unclear. The Ford Maverick, meanwhile, is the one Ford truck completely manufactured in Mexico.
What about Ram trucks? The Ram 1500 is assembled in Sterling Heights, Michigan, but the Ram 2500 and 3500 are built in Saltillo, Coahuila, Mexico.
If you look at any other American truck manufacturer, the story is largely the same: some trucks are assembled in the U.S., some are assembled in Mexico, and all of them use components sourced from the U.S., Canada, Mexico, and parts unknown.
So what would happen if Canada and Mexico were hit with massive tariffs? I’ll tell you what won’t happen: truck companies are not going to keep their prices the same just because they love their consumers so very much. Vehicle prices are going to increase.
The other thing that’s going to happen is that when domestic manufacturers see that consumers are willing to pay more for a rival’s product, they’re going to increase their own prices whether they’ve been impacted by tariffs or not. Why wouldn’t they? They’re leaving money on the table otherwise.
We’ve already seen this with the pandemic and the skyrocketing prices of goods due to “supply chain issues.” One would imagine those issues have largely resolved in the last four years, but prices at the grocery store haven’t gone down. Corporations have seen what the market is willing to bear, and they’re going to make us bear it.
But maybe I’m wrong and domestic products won’t increase in price. Then we can just buy domestic and the tariffs will work as intended!
Unfortunately, that’s bad news for coffee drinkers, since the only two places in the U.S. where you can grow coffee beans are Hawaii and Puerto Rico, and I expect prices will go up as demand increases.
It’s also bad news for anyone who likes fruits and vegetables that aren’t corn or potatoes; the vast majority will only be available at limited times or entirely unavailable.
It’s also bad news for anyone who likes buying consumer electronics. Get your big screen TV, PlayStation, and iPhone while they’re still relatively cheap!
Oh, and if you wear clothes, you should probably either add to your wardrobe now or embrace the naturist lifestyle.
Also, if you have any plans to use lumber, steel, petroleum, or any products derived from those things, it’s best to stock up now.
I realize this column seems grim, and just lately, I can’t help but wonder if I’m overreacting to our present moment. To that end, I looked up the last time in American history that sweeping blanket tariffs were enacted on tens of thousands of consumer goods as part of a politically-motivated policy of trade protectionism.
Unfortunately, it was called the Smoot-Hawley Tariff Act of 1930 and it’s considered one of the leading factors in the Great Depression.
