I’m trying, I really am trying to keep pace with President Trump’s so called Tariff War with the Chinese but then I get confused when Ms Huckabee Sanders explains to us that President Trump reserves the right to retaliate to the unfair and punitive tariffs that the Chinese have imposed on US imports (which were in response to unfair and punitive tariffs that Trump imposed on imports from China).
I do understand that all of this is to do with making America great again and the rest of us not so much, but what I failed to appreciate was the impact that tariffs have on global trade, as indeed did our BFF Donald. He tells us that, just like the Mexican wall, somebody else will pay and it’s going to be win-win all the way. But is it?
I’ve been doing some reading and I understand that a tariff is an imposition that an importing country places on imports at their point of entry, either all imports or selected commodities, services and manufactured goods: what Tony Abbott would call a ‘Great Big New tax’ if it was being imposed by anybody but him and our good mate Donald. The tax is payable by the importer and thus lowers the importer’s margin of profit when he on-sells the goods etc: that last was a fib, the importer actually passes on the tariff tax to the consumer.
So what happens to the tariff once collected as a tax on imports? Well it goes straight into the government’s back pocket. As some uncharitable people would say, as a means of offsetting the corporate tax revenue losses to government when you give big companies a massive tax cut as Trump has just done: so, the punter also known as the man (or woman) on the street and previously known in legal circles as the ‘man on the Clapham Omnibus’ cops it in the neck or rather it comes straight out of your back pocket and into the government’s. So it’s all good, the government’s loss of revenue due to corporate tax cuts is made up for by the tariff impositions which are paid for by the bloke in the mirror: the old pea and thimble trick.
As I understand it, the idea behind the tariff tax on imports is to encourage punters to buy locally made goods as, theoretically, they will be cheaper than imported goods because of the tariff imposed. A bit like, if you will, Australia imposing a tariff on imported automobiles so that instead of you mob buying your Audis and BMWs you buy a Holden thus supporting employment and the economy of … err South Australia Korea: not such a good example, but you get the picture.
So, Turnbull with much enthusiasm says that he too will cut company taxes but unlike Donald he doesn’t have a plan B to recoup the diminished government revenues but then, who needs hospitals, schools, roads and all those other uppity socialist things. We’ll just privatise healthcare, put tolls on roads and everybody can go to a private school. In the May budget, which in many respects will be the election budget he will, to get his company tax cuts through the Senate, foreshadow a reduction in personal income taxes, again unfunded. This personal income tax cut will probably be scheduled for the first year of a post-election government which will be his principal gambit for re-election and also a firm wedge on Labor who will find it very hard to campaign against tax cuts.
We live in interesting times: I just hope that our children and grandchildren will find it in their hearts to forgive us for what we are doing to their endowment.
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