Source: Qin Shuo’s circle of friends
‘Tariff’ is President Trump’s favorite word. During the 2024 presidential campaign in October, Trump said in an interview with John Micklethwait, editor-in-chief of Bloomberg, at the Economic Club of Chicago: ‘For me, the most beautiful word in the dictionary is ‘tariff,’ which is my favorite word.’
Trump implemented trade protectionism in his first term, imposing tariffs on China and the EU, waging a trade war that lasted from mid-2018 until the outbreak of the COVID-19. China was indeed heavily affected, and Trump likely sees this as a result of his trade war, hence his determination to “keep up the good work” in his second term.
On the first day of his presidency on January 20, 2025, Trump issued a presidential memorandum, which mentioned that US government agencies should use tariffs and other measures to develop appropriate responses to America’s trade deficit and other issues.
This provision is considered a revision of the ‘across-the-board tariff’ wording. Last year, during his presidential campaign, he advocated for imposing tariffs of over 10% on all imported products entering the United States, this indiscriminate tariff is referred to as the ‘across-the-board tariff’.
On January 26, a week later, Trump announced a 25% tariff on all Colombian goods entering the United States in retaliation for Colombia’s refusal to accept illegal immigrants deported from the United States. The next day, Colombia capitulated, and Trump immediately revoked the tariff.
Another week has passed, on February 2nd, Trump officially signed an executive order imposing a 25% tariff on non-energy goods exported from Canada and Mexico to the United States, and an additional 10% tariff on China on top of the current tariffs, effective March 4th. We were supposed to welcome the God of Wealth on the fifth day of the new year, but instead, we welcomed a plague of high taxes.
The largest single-day tariff action in history against its top three trading partners, covering 42.9% of its imports, marks the comprehensive upgrade of Trump 2.0’s tariff weapon against the United States.
In terms of the political procedure for imposing tariffs, Trump has once again created a ‘first.’ He is the first president to implement tariff policies by invoking the International Emergency Economic Powers Act (IEEPA), which was enacted and implemented in the United States in 1977 (a predecessor of the 1917 Trading with the Enemy Act). The act grants the president the power to bypass Congress and implement trade policies by issuing executive orders.
The president can also invoke specific trade provisions (such as Articles 201, 232, 301, 122, and 338) to issue executive orders to implement trade policies, but this method must first undergo relevant investigations, which is time-consuming and laborious, not as simple and efficient as invoking the International Emergency Economic Powers Act.
Trump cited the law several times during his first term to achieve his goals, so on his first day in office, he issued Executive Order 10886, declaring a national emergency at the southern border of the United States due to issues of illegal immigration, illegal drugs, and drug trafficking.
On February 1, another executive order was issued to expand the scope of the national emergency state, considering the failure of the so-called Mexican, Canadian, and Chinese governments to effectively control the export of illegal drugs such as fentanyl as an unusual and extraordinary threat to the United States. The following day, tariffs were imposed on the three countries in one go.
On February 3rd, Canada and Mexico made concessions on border issues to the United States, and Trump agreed to postpone the imposition of tariffs on Canada and Mexico.
Another week later, Trump announced a 25% tariff on all imported steel and aluminum to the United States, which will take effect on March 12th. Canada and Mexico are the main sources of steel and aluminum imports to the United States. Trump emphasized that there are no exceptions or exemptions for the relevant requirements.
On February 13th, Trump announced the latest tariff decision: to impose ‘reciprocal tariffs’ on other countries in the coming weeks or months, meaning that the US will impose as much tariff on the other party as they impose on the US. However, the implementation of this policy is quite complicated, as it requires the calculation of tariff rates for each item.
According to statistics, this involves over 5,000 types of goods, 186 countries and regions, requiring about 930,000 calculations. It’s simply impossible to calculate. That’s why Trump changed the effective time from ‘immediately effective’ mentioned a few days ago to ‘in the not-too-distant future’.
On February 14, Trump also stated that tariffs on imported cars will be imposed as early as April 2 to protect the domestic automobile industry. However, it is not yet clear whether this policy applies to all imported cars.
Trump has now found a shortcut to impose tariffs at will, bypassing the legislative body and all other constraints. What policy objectives does he really want to achieve with these dazzling and frightening tariff policies? Can these objectives really be achieved?
There are only two purposes, materialistically it is revenue收入, spiritually it is revenge报复.
First, Trump wants to increase the fiscal revenue of the US government. Tariffs are collected by the US federal government and belong to the federal government’s fiscal revenue. This is obvious. The question is, who pays the tariffs? Does Trump know the answer to this question? This is a mystery.
The prevailing opinion is that he doesn’t know. He sincerely believes that tariffs are paid by the ‘foreigners’ who export goods to the United States. He has expressed this view with great certainty on multiple occasions, indignantly stating that foreigners should not take advantage of Americans, showing genuine emotions, and not pretending.
This view can be correct theoretically and in the long run, in equilibrium. However, in practice and in the short term, it can be very wrong in the process of adjusting to equilibrium.
Foreign companies export goods to the United States, and U.S. importers pay customs duties to U.S. Customs, clear the goods, and sell them in the United States. The ones directly paying the customs duties are U.S. companies, not foreign companies.
Ultimately, who pays for this cost depends on the bargaining power of both parties. If an American company must purchase goods from a foreign company, it must bear this cost itself. If the American company has many choices and does not need to purchase goods from this foreign company, while this foreign company has only this one customer, the American company can demand the foreign company to reduce the price or pay this cost in other ways. Most of the time, the situation falls somewhere in the middle of the number line formed by these two endpoints.
Currently, the situation of American companies is closer to the former. For example, American companies that import goods from China are unlikely to find alternatives with better cost performance in the short term. When shopping at Walmart, anything made in China is priced so low that it’s touching, while American-made products are priced so high that it’s heartbreaking.
A set of decent-looking clothes made in China costs less than a few heads of Napa Cabbage produced in the United States. If it’s at Publik supermarket (a bit more upscale than Walmart), cabbage is sold by weight, and a larger cabbage costs nearly $20. Of course, cabbage may not be a good reference point, as Americans seem to not be very fond of eating cabbage, so it may be grown in smaller quantities and thus be particularly expensive.
However, the overall conclusion still holds true: Chinese products are cost-effective and of good quality, so American companies are willing to import them. In the short term, it is difficult for American companies to import such cost-effective products from other countries. Firstly, other countries may not necessarily have such diligent and intelligent people with such low requirements for compensation, working conditions, and environmental protection. Secondly, even if they do, the transfer of the supply chain will take time. Therefore, in the short term, American companies importing goods from China must bear the cost of tariffs.
Will they pass on this cost to consumers? This also depends on the relative bargaining power of both parties. On February 11, Walmart’s Chief Financial Officer John David Rainey told CNBC that Walmart would have to significantly raise prices on goods affected by tariffs. Consumers have no bargaining power in front of retail giants.
So, in the end, through the mechanism of bargaining power transmission, American consumers will bear the tariffs raised by Trump.
In other words, the increase in fiscal revenue from the US government through imposing tariffs actually comes from the pockets of the American people. It can be seen that if the bargaining power is strong, the tariffs are paid by “foreigners”; if the bargaining power is weak, the tariffs are paid by “their own people”. The American Retail Industry Association estimates that Trump’s new tariffs will cost consumers an additional $46 billion to $78 billion. This is like imposing taxes on their own citizens.
Sadly, this kind of tax directly affects the livelihood of low-income people. For the annual fiscal revenue of the U.S. federal government of trillions of dollars, adding a few hundred billion is just a tiny bit, but for low-income people, this is money for bread, eggs, and milk powder. It’s not very kind for the government to take money from their mouths.
However, taxes in the United States have always been like this, with the wealthier individuals bearing lower tax rates. Ethical billionaires like Buffett cannot bear to see this and have repeatedly urged the U.S. government to pay attention to this issue, calling for an increase in taxes on the wealthy, including himself.
In August 2011, Buffett even wrote a column in The New York Times, arguing that current US laws are too ‘friendly’ to billionaires and should tax them more. On September 19, 2011, President Obama proposed to Congress to increase taxes on the wealthy to ensure that the tax rate for billionaires with an annual income exceeding $1 million is not lower than that of the middle class.
Obama referred to this proposal as the “Buffett Rule” or “Buffett Tax.” Later, it was jokingly called the “rich tax.” The Democratic Party pushed for the “Fair Tax Act of 2012,” but to no avail.
The marginal tax rate paid by the typical middle class in the United States is around 15% to 25%. For the wealthier middle class, most of the income may be subject to a 35% marginal tax. However, the tax rate on investment income does not exceed 15%, much lower than the wage tax rate. This means that people who earn income from capital bear a much lower tax rate than those who earn income from labor.
Buffett himself cited an example. His total tax bill in 2010 was $6.4 million, only 17.4% of his taxable income. The average tax rate paid by more than 20 employees in Buffett’s office is as high as 36%, which is very unfair.
Bill Gates strongly supports Buffett and provides additional insights, believing that the focus of increasing taxes on the wealthy should not be their income tax, but rather estate tax, capital tax, and other taxes.
While advocating for the imposition of a “wealth tax,” Buffett also proposed specific methods to reduce the tax burden on the poor. Shortly after the outbreak of the 2020 epidemic, Buffett, in Omaha, gave an exclusive interview to Andy Serwer, Editor-in-Chief of Yahoo Finance. He suggested that the government exempt labor income tax for low to middle-income wage earners (especially couples with children) on a monthly basis, rather than annually, considering that most bills are paid monthly rather than yearly.
Regarding the “wealth tax,” Trump and Buffett have completely opposite attitudes. Trump is very proud of his ability to cleverly exploit tax loopholes to avoid taxes. In the second presidential debate of the 2016 election, he even shared his experience of tax avoidance, saying: “By recording assets as expenses or losses, you can effectively reduce the value and income of the asset, with a large part of the cost being depreciation.” He also claimed that Buffett received huge tax deductions.
The next day, Buffett issued a statement detailing his tax affairs: “My 2015 tax return shows an adjusted gross income of $11,563,931 and a federal income tax of $1,845,557 for the year. Similar situations are reflected in previous tax returns. I have been paying federal income tax every year since I was 13 in 1944.”
On July 1, 2021, the Trump Organization and its Chief Financial Officer Weisselberg were sued by the Manhattan District Attorney’s Office in New York for alleged financial fraud and tax crimes. In August 2022, Weisselberg pleaded guilty, and as part of the plea agreement, he turned into a tainted witness, pointing the finger at the Trump Organization. In December 2022, the Supreme Court of New York officially ruled that Trump Organization was guilty of 17 criminal charges, including tax fraud.
Trump’s attitude towards taxation has always been “tax cuts”, but it is aimed at tax cuts for the rich. It is the Democratic Party’s president (such as Biden) and Democratic presidential candidates (such as Harris) who truly hope to reduce taxes for the poor.
You might think that the poor would support the Democratic Party and its presidential and presidential candidates, but the opposite is true. It is the poor who are mainly responsible for bringing Trump back to the White House, just like last time.
Why is this?
This may be related to the second purpose of the tariffs claimed by Trump, which is revenge. He claims that imposing tariffs can force entrepreneurs to move factories back to the United States from abroad, provide employment opportunities for the American people, and help the American people regain the rice bowls taken away by ‘foreigners’.
However, upon careful analysis, can Americans really do, or are they willing to do, the so-called 'jobs stolen by ‘foreigners’? These jobs are basically hard, tiring, dirty work, and the pay is very low.
The United States once had many textile mills. Buffett’s company Berkshire Hathaway had earlier acquired two textile mills in the northern New England region of the United States. After more than 20 years of struggle, Buffett finally closed the textile business in 1985.
The textile industry first moved from the northern United States to the southern United States, and then moved abroad. The United States also had many steel mills. During the industrial revolution, the manufacturing industry was very developed in the northeastern Great Lakes region, forming a “Manufacturing Belt,” which has now become the “Rust Belt.”
If someone proposed to bring the textile industry back to the United States now, Americans would think the person is crazy; but now Trump proposes to bring the steel industry back to the United States, revitalize the “Rust Belt,” and Americans think he is a savior.
The textile industry has disappeared in the United States, and the steel industry has basically disappeared, but the U.S. economy has not stagnated. In fact, the U.S. economy has soared. In 2016, Buffett pointed out in his letter to shareholders that since his birth in 1930, per capita GDP in the United States has increased nearly sixfold. He said, “America is great now and will be great in the future,” directly referring to Trump’s campaign slogan MAGA (Make America Great Again).
Eight years later, the U.S. GDP has risen from $18.8 trillion in 2016 to $29.2 trillion in 2024, with only a slight increase in population. Stock market indices continue to hit record highs. In the year Warren Buffett was born in 1930, the Dow Jones Industrial Average (referred to as the Dow) was at 250 points. On December 31, 2016, it was at 19,762 points; on December 31, 2020, it was at 30,606 points; and on December 31, 2024, it was at 42,544 points. From a numerical perspective, whether the U.S. is great or not has little to do with who is the president.
Although the ‘manufacturing belt’ in the United States has turned into the ‘rust belt,’ Silicon Valley has emerged, the computer industry is booming, followed by the Internet, now it’s artificial intelligence, and then humanoid robots. It can be seen that as long as the system can stimulate human creativity, there will be wave after wave of innovation continuously promoting economic development. Why bother to go back to the low-end manufacturing industry? Already at the top of the food chain, why go down and compete for food with prey?
Of course, this is the truth from the perspective of the overall and long-term economy of the United States. But what should be done for those outdated people in the current ‘’?
Buffett believes: “The government should let them find a sense of belonging in the market system, as the American economic goose continues to lay golden eggs, let them get a larger share.” He compares the United States to a wealthy family with many children, saying: “If you have six or seven children and a family business to pass on, you will definitely choose the most capable one to inherit the family business, because the market system requires it, but at the same time, you also have to ensure that all 7 children can participate in sharing the family’s wealth.”
In other words, the US government should provide sufficient welfare, medical care, and education for those less capable citizens, allowing them to live a decent life and ensuring that their descendants have similar educational opportunities as the descendants of the wealthy, in order to obtain good job opportunities and improve social status.
For vulnerable groups, ensuring equal opportunities and social mobility is the most responsible and effective assistance the government can provide to them.
What’s the point of trying to snatch back outdated rice bowls from foreigners’ hands? Even if they are snatched back, they are unwilling and unable to work, and their children are even more unwilling and unable to work. Starting a full-scale trade war should not be done, because ultimately, it is these people who will be hurt.
This makes people have to doubt who Trump is doing this for? If he really cares about the poor, why raise tariffs? Of course, as mentioned earlier, he may genuinely believe that tariffs are paid by foreigners.
But why is he unwilling to raise the minimum wage per hour? Harris promised during the campaign that if elected president, he would raise the minimum wage per hour from the current $7.5 to at least $15. But Trump is unwilling to commit, even when repeatedly asked.
Ironically, those who support Trump the most in starting a trade war are the very same poor people. Why? Starting a trade war, raising tariffs, and snatching the rice bowl back from foreigners’ hands, this kind of narrative is particularly moving because it contains various primitive, instinctive, and intense emotional elements such as fear, hatred, revenge, and victory, so the emotional value is at its peak.
In addition to revenue and revenge, Trump’s third purpose in imposing tariffs is to use tariffs as a bargaining chip to gain the initiative in negotiations on immigration, drug, and even territorial issues.
While brandishing the whip of imposing tariffs, he renamed the ‘Gulf of Mexico’ to the ‘American Gulf,’ threatened to take Greenland by force, claimed to have control over and take Gaza, and even bypass Ukraine to negotiate a Russia-Ukraine ceasefire agreement with Putin, leaving people astonished.
However, the rust belt’s Sichuan fans cheered and rejoiced, they finally found the feeling of greatness again after many years of loss, and once again became “Viagra”. Although this feeling may not bring them more income or a better life, in fact, they may soon not even be able to afford things made in China, but they feel super good.
Trump has long known the traffic password to get the support of these people, without providing bread, just provide spiritual opium. ‘Trump feeds the people with spiritual opium,’ this is not the author’s original, it is a quote from Vice President Vance.
Of course, these are the words Wan Si used to curse Trump before he sought refuge with him. He said Trump is Hitler, a drug dealer peddling false hopes and spiritual opium.
However, history has repeatedly proven that it is the drug dealers who unhesitatingly and without guilt use the weakness and evil of human nature who are most popular. Churchill said, “Talk to an ordinary voter for five minutes and you’ll find the best reason to oppose democracy.”
