Last weekend, I spent an inordinate amount of time in my local wine shop, staring longingly at a bottle of wine that has become a favorite of mine and which I regularly enjoy. However, the feelings of joy that I normally associate with it gave way to frustration, sadness and even a modicum of anger because after Jan. 1, the price of it at this wine shop, as well as several others across the country — in addition to all other wines from France in that particular wine shop — will rise 25 percent as part of the response to Europe's subsidies of Airbus.
Why? President Donald Trump's tariffs.
As the president’s misguided worldwide trade war rages, the latest salvo is the United States Trade Representative’s further proposed 100 percent tariff on several goods imported from France as a response to its taxes on digital companies — and it's Americans who are paying and will continue to pay the price. The president and his supporters keep insisting, incorrectly, that the countries (China, France, etc.) from which tariffed products come are the ones paying their cost, but the truth of the matter is that tariffs are never paid by the country on which they are imposed.
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Instead, their cost — initially paid by the company producing the good — is passed on to you and me: the consumer. Companies who sell goods subject to tariffs raise their prices in accordance — which in turn means that the cost is being passed on to us, the consumer, via what is a shadow tax. (That is basic capitalism.)
And it is not just French wine that will be seeing its price increase: Everything from luxury items to durable goods — such as food and clothing — imported from a multitude of countries throughout the world will be subject to these new taxes ultimately paid by Americans.
So not only will there be political ramifications for the president and those who support the trade war, but, and more important, there will be economic consequences that will affect all Americans.
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Right now, the economy is in fantastic shape: Unemployment is at record lows and wages are rising. Trump is right to tout its strength — and he does so regularly. However, several polls have revealed a troubling trend: Americans acknowledge the great economy, but are pessimistic that they are themselves a part of it. In an Economist/YouGov poll released last week, 62 percent of Americans said that their finances have either not improved or gotten worse over the last year. This tracks with polling over the last several months, including those preceding the 2018 midterm elections that saw Democrats retake control of the House of Representatives.
Now, these very same Americans, who already are seeing and worrying about the increasing cost of living, must either face (or are already living with) a Trump-induced rise in prices of many of the goods they buy.
According to economists, Trump’s 15 percent tariff on Chinese goods that went into effect at the beginning of September will cost the average American family an extra $460 a year, but could be as high as $970 a year. And that was before Trump threatened to impose yet more tariffs on Chinese goods, as well as those from other countries, that Americans buy.
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His own behavior and utterances, which include his threats of massive tariffs against a host of nations, have economic consequences for all Americans. The stock market certainly takes note, as Trump’s tweets and statements have caused massive single day drops of the Dow Jones Industrial Average and other market indexes.
While that might seem abstract to some, 55 percent of Americans own stock and even more have money in the market via their 401(k)s, IRAs or pension plans. As a result of how the president can shake investor confidence, JP Morgan even created “Volfefe,” a volatility index that measures the impact of Trump’s tweets on the stock market (and a reference to one of the president's viral typos in 2017).
Creating agita via tweet-induced market drops and raising the cost of living for Americans heading into a re-election campaign is not, as some of Trump’s social media boosters will claim, a brilliant form of political jiu jitsu or some brilliant stratagem in a game of three-dimensional chess that the rest of us are all too dim to understand. In reality, imposing tariffs willy-nilly to "punish" other countries without realizing the toll it takes on his own countrymen is the act of an incumbent president finding a way to hamper his re-election prospects.
It does not take an expert to know that hurting the economic conditions of voters is not a smart electoral strategy. And Trump is already facing some major headwinds in his re-election campaign.
As the previously mentioned polls found, over half of the country (oscillating from 54 to 64 percent) believes that the United States is headed in the wrong direction. At the same time, voters are regularly saying that health care is the most important issue for them heading into the 2020 election — an issue that Democrats have used to their electoral advantage since the 2016 election.
When you factor in the fact that three out of four Americans worry that the cost of health care is too high and 45 percent worry that they could be bankrupted by a major health issue, it is easy to see how these circumstances work against Trump.
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Further, Trump is already facing problems with three key demographics, all of whom have aided Democratic candidates over the last few years. First, suburban women, who helped Republicans win the House in 2010 and the Senate in 2014, are abandoning the GOP and turning toward Democrats. Next, the era of Trump has energized and turned out millennials and younger voters, who lean left but historically do not vote at a high rate. In 2018, they voted at the highest rate for a midterm election in over 100 years.
Lastly, there are senior voters, who Republicans rely upon winning by double digit numbers in every election. Now, polling and election results show that Americans 65 and older are also moving away from Trump and the Republican Party.
It makes one wonder if the trade war and resulting economic costs are popular with these demographics as well as Americans in general. (Spoiler: They are not).
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At the end of the day, every American will visit a store, see an item that they want and then discover the sad news that its cost has risen since the last time they looked at or bought it. Even if the price is up by just a few dollars, that few dollar increase harms every family and the overall economy. We will all debate how to adjust to the new financial reality, be it when buying necessary items such as food and clothing, or more luxury items like wine. Each one of us is going to feel the trade war’s impact before heading to the polls in 2020, and it is not going to make any of us feel good.
And, unfortunately, if voting for Trump doesn't feel good to people in 2020, that's a bigger problem for him than a price increase in one of my favorite wines is for me.
