What Accountants See In President Trump’s Tariffs
The impact of US Tariffs on our economy is likely to be the most consequential economic policy of the Trump Administration. Only now are we beginning to see what tariffs will mean in our daily lives.
From manufactured goods to farm crops, it takes weeks, often months, for products to be completed and brought to the marketplace. But that’s happening now. In a previous article, we discussed the current soybean crop; however, the same applies to corn, and this year’s overall farm harvest. Soybeans were planted and harvested before President Trump announced his tariffs on April 2, also known as Liberation Day. There was no opportunity for the farmers to adjust their plantings.
However, this hasty rollout of Trump’s tariffs was far from the only issue. Indeed, the presumption, by the Administration and many Americans, was that there were significant problems with America’s current Trade Policy. As the President has repeatedly said, “We’ve been ripped off.” I’m one of those who believe that Trump is right about this. Over many years, there has been a progressive Deindustrialization of our nation, resulting in the loss of many jobs.
In his April 2, 205 Liberation Day Speech, the President put it this way:
“For decades, our country has been looted, pillaged, and plundered by nations near and far, both friend and foe alike. American steelworkers, auto workers, farmers, and skilled craftsmen — we have a lot of them here with us today — they really suffered gravely. They watched in anguish as foreign leaders have stolen our jobs, foreign cheaters have ransacked our factories, and foreign scavengers have torn apart our once beautiful American dream.”
https://singjupost.com/transcript-of-president-trump-remarks-at-liberation-day-event-april-2-2025/
Unfortunately, the fact that Trump may have correctly identified the problem does not necessarily mean that he has also identified the solution, and it’s here that the accounting issues arise.
The first accounting issue was: who pays the Tariffs? Commerce Secretary Lutnick and others in the Administration initially asserted that overseas producers would pay the tariffs; this was later modified to state that import agents would pay the tariffs at the port of entry. Indeed, both of those responses may be the case in certain instances. However, they do NOT tell the whole story. In the real world, the one you and I live in, tariffs become just a cost of sales and, in fact, become part of the final price at which a given item sells. You and I, the consumer, ultimately “pay” the tariffs in the end sales price (which reflects all production, transportation, and other expenses, like tariffs).
Do we care if an anonymous import agent “pays” a tariff at the dock, when that “payment” is merely passed along the retail chain and reflected in the price at the store?
The second accounting issue comes from President Trump’s use of the inclusive “we.” As in “We’ve been ripped off.” It’s a standard device used by politicians to let the electorate know that they’re part of the greater community. However, in the case of Tariffs, Trump is not part of the economy that has been “ripped off.” He represents a third party who only enters this equation because it writes the tax laws.
In listening to the President, most of us likely believed that Trump’s Tariffs would help those American steelworkers, auto workers, farmers, skilled artisans, and many others who have lost jobs or suffered financially from the existing unfair trade situation.
But not so fast.
Like any good accountant, here we must “follow the money” to understand who will benefit. The “we” whom Donald Trump implies will benefit is decidedly not the various workers, farmers, or managers of American businesses. Instead, the beneficiary of Trump’s Tariffs is the US Treasury — that’s where the funds go. Tariffs are designed and managed to flow through to the Federal Government.
Now, let’s rewrite Trump’s Liberation speech as if it were an account that would be used to write a disclosure document. Accepting the premise, America has been “ripped off,” proposing the new policy: “While American workers, farmers, and others have been ripped off, the President proposes a new tax to be levied on various imports.” It has a very different ring to it.
(see: https://www.congress.gov/crs-product/IF11030, if you don’t believe tariffs are taxes)
Following the accountant’s logic, it is evident that President Trump’s policies are at odds with this country’s traditional free market economic system. Under Trump, the Federal Government becomes the hub, the critical decision point where markets are balanced, not the free market our founding fathers envisioned.
There is currently a stunning example of how this “re-balancing” will work. In a previous article, we discussed the current conditions of soybean farmers.
(see: https://www.valueside.com/the-tofu-war/).
In the back-and-forth trade war between the United States and China, China has decided to forgo purchasing American soy. Last year, they bought $12 billion of US soy; this year, they have bought nothing. It’s a financial hit that American farmers cannot afford. Many farmers could lose their equipment and even their farms if they lose $12 billion in Chinese sales.
Incidentally, this is precisely what happened during Trump’s first Administration, when those Farm tariffs resulted in lost Chinese income, and Trump then provided a bailout for the farmers of (you guessed it) $12 billion.
While it’s interesting to see how history repeats, the significance here is that these Trump Tariffs have revolutionized the American Economy. No longer are farmers and their agents negotiating with Chinese buyers; that’s been taken away from them. Today, Trump’s Tariffs have so influenced the supply-demand equation in soy that US farmers cannot compete in the Chinese market. Trump has imposed a soy price so high that US Farmers are outbid by Brazilian (and other countries’) farmers.
To compensate for this loss, the Trump Administration has indicated that it will once again propose a farm aid package, reimbursing farmers for the $12 billion loss in Chinese sales.
In conclusion:
When viewing the Trump tariffs through the “green eyeshades” of an accountant, we see that Tariffs become the chief price-setting tool for both American exports and imports. That tariff income flows through to the US Treasury, benefiting the Federal Government, not the factory workers, farmers, and manufacturers, as President Trump promised.
In short, for a country currently dependent on a coordinated system of international supply chains and global manufactured products for economic prosperity, we will now depend on Trump’s trade negotiators to provide supply-demand equilibrium.
Briefly put, our former free market system is being replaced by a centrally planned bureaucracy.
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