August 12, 2025 • 29 mins
Trump’s 2025 tariffs will hit nearly three-quarters of US food imports, raising prices on products that are often difficult or impossible to produce domestically. Senator Hawley has proposed a rebate program to return some of the revenue to households—but would it actually help?
Kyle Hulehan is joined by Alex Durante, Senior Economist at the Tax Foundation, to unpack how these tariffs work, the economic trade-offs of a rebate, and why repealing tariffs may be the most effective solution.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Kyle Hulehan (00:00):
Hello and welcome to the Deduction of Tax
Foundation Podcast.
I'm your host, Kyle Houlahan,and we are back with another
episode.
And we are joined by AlexDurante, senior Economist at the
Tax Foundation.
Now, Alex, we are here to talkabout.
Tariffs, uh, tariffs are back inthe news again.
Unsurprisingly, we love to talkabout tariffs on this podcast.
(00:20):
So you recently had a piece thatwas about food imports getting
hit by tariffs.
Could you walk us through that?
Alex Durante (00:27):
So the way that tariffs impact, the food and
agricultural sector is a littlebit different than how they
impact, the manufacturingsector.
When a foreign imported good isfacing, um, a tariff, like a, a
type of manufacturing input theimporter has a couple of
different options there, right?
They could just continue, toimport the good from abroad and
pay that higher tariff price.
(00:49):
Or they could switch to adomestic supplier.
And if they do that, they wouldstill be.
They would still be paying ahigher price than they would be
in the world in which thetariffs didn't exist.
But they would be somewhatinsulated from the full tariff
price increase.
But with the agriculturalsector, it's a little bit
different.
Because in many of those casesthere really isn't a viable
(01:11):
domestic supplier that'savailable.
And I think the reason, forthat, should be pretty obvious,
which is that there's justsimply certain foods that.
We can't grow in the US and tothe extent that we can we can't
grow them enough to meetconsumer demand.
two examples I'll give, which Italk about in my piece.
So, so one is uh, bananas.
Most bananas.
(01:33):
They're consumed in the us areimported mostly from Central
America, specifically Guatemala,and we only grow bananas in two
places in the US that's inFlorida that's in, in Hawaii.
There really is no.
Viable situation in which those,plantations there are going to
be able to increase, theirsupply of bananas so much to be
(01:56):
able to meet consumer demand.
So in that case the importer, orrather the consumer in this
case, I mean, they really, thefinal consumer like us, at the
grocery store.
We really have no choice but tocontinue to import bananas from
abroad.
Then pay higher prices forthose.
And then the other example I'llgive to illustrate this is
(02:16):
coffee.
And right now coffee, which isactually one of the largest food
imports that is facing tariffs.
We get a lot of coffee.
from around the world especiallyBrazil, which is currently
facing a 50% tariff.
And although there was a, anexemptions list that was
released for Brazil, that listincluded orange juice and Brazil
(02:39):
nuts in terms of food productsthat were exempt, but it did not
include coffee.
As it comes to coffee.
there are certain places in theUS where coffee is grown.
But there's a significant lagtime in terms of how long it
takes those coffee plants tomature and they actually have a
viable product.
So there again, it's just notsimply the case that we can
replace farm production withdomestic production.
(03:03):
And then one other thing I'lladd that sort of complicates the
story even more.
Is that we're all, we also haveto account for the fact, that
consumers have certain tastesand preferences for certain
kinds of food imports.
So one example of this isEuropean wines and spirits
specifically.
Those are gonna be facing 15%tariffs.
(03:23):
And th and there are a very.
food import for the US now Sure.
Could us, you know, could USconsumers, could they switch to
wines, say that are producingCalifornia?
Sure they could do that.
But you know, if they have aspecific taste for French wine,
let's say you can't grow Frenchwine.
(03:43):
In the US or else it ceases tobe French wine.
So when you account for some ofthose tastes and preferences
while it is possible thatconsumers will switch to some
more domestic brands andvarieties really depends on what
their tastes and preferencesare.
And in that, and in those cases,they might simply just have at
no point, or no other solutionthat they really like.
(04:03):
French wine to just continue tobuy French wine at the higher
tariff price.
Kyle Hulehan (04:08):
So I gotta ask now that you're, talking about
coffee and wine and what's your,do you have a coffee of choice?
Do you, are you a coffeedrinker?
Will this affect you?
Alex Durante (04:16):
I am a coffee drinker.
I, I do like my coffee.
I am.
I would not say myself.
I am particularly loyal to anybrands in particular.
But that doesn't necessarilymean that I won't be affected.
Because again, coffee is apretty significant.
import for the US and a lot ofit is, you know, coming from
South America, some of it'scoming from Southeast Asia as
(04:37):
well, like Indonesia.
I, I, I imagine that given thatI am a drinker of coffee, I will
probably be affected
Kyle Hulehan (04:42):
it's a little funny'cause I feel like that
goes against a little bitagainst TF culture.
I feel like we have a lot oflike coffee heads, people
really, like, they know theirthing.
So they'll definitely beaffected, some of our staff.
But I wanna follow up here withdo you feel like pharmaceuticals
are getting caught up in this?
'cause I heard something aboutthat.
Alex Durante (04:59):
So we have been hearing rumblings that
pharmaceutical imports would befacing potentially tariffs up to
250% potentially starting nextweek.
Although we haven't been given afirm deadline on this, we also
haven't been given.
Any kind of indication of whatkinds of products that would
include.
Right now, for me, it's reallyhard to understand what the
(05:22):
justification is for doing thiskind of policy.
Now, I would imagine that theadministration is making the
argument that well.
There's a lot of pharmaceuticalimports that we get from places
like China.
Should some kind of hot warbreakout between the US and
China perhaps it would not, youknow, it might not be the best
idea for them to have access toall these critical supplies.
(05:46):
And in that case it would bebetter to have all those supply
chains concentrated.
In the US now, I will grantthere, there is potentially a
national security risk there,but I think what needs to be
highlighted is that havingsupply chains concentrate in the
US is not a good way todiversify your risk.
(06:06):
And, I'm remiss to even bring upCOVID because I think it's a
period of time with all
Kyle Hulehan (06:10):
Yeah.
Alex Durante (06:11):
frankly just forget about.
Kyle Hulehan (06:12):
Yeah.
Alex Durante (06:13):
came up, five years ago.
I think what we learned is that,from that experience that um,
just because you have all yoursupply chains in the US doesn't
mean you're insulated.
From a pandemic, because we hadmany, plants that were shut
down, as the virus wasspreading.
What would make more sense and Ithink be a better alternative to
taring?
(06:33):
These goods, if we wannadiversify supply chains, would
be to simply negotiate morekinds of free trade agreements
with other countries.
in order to continue to importthis critical good cheaply, but
also kind of not have that Chinaexposure that people are
concerned about.
it could be, we do more importspharmaceuticals from Vietnam
(06:55):
even India or Mexico.
To me that the president'sapproach here, I think as it
relates to pharmaceuticalimports is very.
very misguided and this is gonnahave impose some pretty
significant costs on thatindustry and, likely risk
increasing the cost of drugs eeven more, which again,
contradicts.
I think a lot of what thisadministration has said about
(07:17):
how they want to work onimplementing policies that lower
drug prices this would not be apolicy to do that.
Kyle Hulehan (07:24):
it doesn't seem like anything that involves
tariffs involves lower orcheaper.
And I want to touch on one thingreal quick.
I think to kind of give a peoplea broad overview of, as we're
talking about these food tariffsand the pharmaceutical tariffs
is in your blog, you had thischart that showed that.
The tariff imports will affect75% of food imports.
(07:47):
Is that correct?
Alex Durante (07:48):
so the reason it's
Kyle Hulehan (07:49):
I.
Alex Durante (07:49):
A hundred percent is because they are, because
U-S-M-C-A, so this was the tradeagreement that we signed with
Canada and Mexico during Trump'sfirst term, which was a
renegotiation of a trade deal,NAFTA that we signed in the
nineties.
that agreement covered manytypes of food imports.
And under the IEP tariffs thatare currently in place,
U-S-M-C-A covered goods areexempt from those tariffs.
(08:13):
Which does cover a pretty broad.
Class of food imports, but itdoes not it does not cover, it
does not cover everything.
So it's not contrary to I thinkwhat a lot of people had.
I think it thought it's notreally, it's not entirely the
case.
That we are totally insulatedfrom the tariffs because of
these exemptions.
Because there are a handful offood products from, from Canada,
(08:36):
Mexico that are still facing thetariffs.
But nonetheless the fact thatthose exemptions are there, are
providing, some relief toconsumers, which I think is a
good thing.
Kyle Hulehan (08:46):
Yeah, but it could be nice to not have them at all.
That would be nice.
Alex Durante (08:49):
Ideally we I would prefer, and I'm sure many other
people prefer to not have the,to not have
Kyle Hulehan (08:54):
Yeah.
Alex Durante (08:55):
Yes,
Kyle Hulehan (08:56):
So to kind of just switch gears here, uh, you know,
there was this other proposaloffered, which is, uh, Senator
Hawley proposed tariff rebates,uh, which does not sound like
the best idea to me.
Could, could you talk to usabout that?
Alex Durante (09:10):
Tariff revenue has brought in about
Kyle Hulehan (09:12):
I.
Alex Durante (09:13):
billion so far.
And Senator Hawley's proposal,which was also floated by Trump
the week prior to that billbeing introduced was to return
some of those proceeds to, theAmerican consumer in the form of
a tax credit that they would beable to claim in advance of
filing season.
(09:34):
This would be very muchanalogous to the stimulus checks
that were passed during COVID.
And so it would have the samephase outs.
So not everyone would get thesame, rebate.
The rebate based on current.
Revenue levels would be about$600 per filer and per dependent
(09:55):
in the household, per qualifyingdependent.
And as part of his bill tax thatnumber would rise as more
revenue is brought in over thecourse of the year.
Now, I am certainly, in favorof.
Relief for consumers from thetariffs.
And in fact, I think, this ifthat was really what we were
trying to do with this policy, Ithink the simplest way to do
(10:16):
that would be to just not havethe tariffs.
People have asked me, certainlyreporters and other folks, is
this sort of an admission by theadministration.
Like, oh, the tariffs actuallyare affected consumers, and to
me it seems that the way they'rekind of trying to spin this.
Is that they sort of just liereally about who is actually
(10:37):
paying the tariffs.
So they will assert that it is aforeign firm, sometimes even
foreign governments that are,which is just not true, that are
paying the tariffs and then theytake, this pool of money and
say, oh, like, isn't it sogreat?
That these tariff policies arebringing all this revenue, as a
gesture of goodwill, we shouldreturn this, to the American
people.
(10:57):
there's actually three problemswith this that I'm gonna, I'm
gonna get into.
So I'm not a fan of the policythough.
I would prefer that they are.
repealed.
But the way I see, you know, aslong as we're going to have
tariffs, which I think is gonnabe the case, at least for the
next four years or certainlytariffs this high, as long as
we're going to have them and wehave this, and this looming
fiscal crisis and, which wasexacerbated, by the deficit
(11:21):
financed tax bill, the one bigbeautiful bill act that was just
passed as long as we haveincreasing deficits and rising
interest costs as well.
It would be more sensible to usethe revenue for reducing
deficits than to simply sendstimulus checks to taxpayers.
(11:44):
the second problem with thepolicy which is curious because
if you recall, you know, duringpresident Biden's
administration, Trump and otherand other members of the
Republican party frequentlyrailed against the stimulus
checks because they wereconcerned about that that policy
increasing inflation.
that is essentially whathappened.
(12:06):
I mean, you we had a restrictedsupply chain because of the
COVID shock, right?
And then we were injectingmoney.
Into the economy, which is arecipe for creating inflation.
Inflation is still running.
bit high.
I mean, It's pretty close to 3%.
Generally when economists thinkof implementing stimulative
policies, it's typically duringan economic downturn.
(12:28):
it does not appear that we arecurrently in an economic
recession.
And therefore it's really hardto see what the need for this
stimulus policy is.
And then the final point that Iwould I would like to make here
as well is that.
What's interesting about this isthat although the rebates would
(12:51):
go to consumers but right nowit's primarily the importing
firm, which is the business thathas been paying.
been paying the tariff, right?
We've only seen a little bit sofar of consumer price impacts.
to me, if you were to do arebate, it seems that you would
want to be reating the, again,if you were trying to, you, you
(13:13):
wanna be reating this, to thefirm, that's actually, the firms
are actually paying the tariffBut of course, as I said, the
point of the policy is not toreduce.
Consumer harm because theadministration does not admit or
acknowledge that consumers andbusinesses and firms are harmed
by this policy.
Kyle Hulehan (13:29):
so.
What does this mean forbusinesses then, especially,
like small businesses, like arestaurant that's, now paying
more for ingredients and there'sno relief side, you know?
Alex Durante (13:39):
So, this is kind of the issue that I think is
really on everyone's mind, Whereare the impacts of the tariffs
going to be on the consumer, thefinal consumer at the point of
sale, you know, like at thegrocery store?
And the answer right now is it'sa bit complicated.
It's primarily the importingfirm, the wholesaler that's
paying the tariff.
Now they have a couple ofdifferent options there, right?
(14:01):
They could.
pass along the tariff to theconsumer.
Or they could pass along some ofit and then absorb the rest of
it.
And what's interesting is thatif you look at some of the
evidence we have of this so far,so back in May, the federal
Reserve Bank of New York fieldof the survey.
Now of course this is before alot, this is before a lot of the
(14:23):
largest tariffs went intoeffect, which happened
yesterday.
Right?
So this is when.
Most countries were facing a 10%baseline tariff.
And then Canada, China, andMexico were facing higher
tariffs.
And what that survey found, theyasked firms, how are you
responding to the tariffs?
And what they found was thatabout 45% of firms they surveyed
(14:44):
indicated they passed along atleast some of the cost to
consumers.
another third said they hadfully passed along the costs to
consumers.
Now that survey does leave, doesmake one wonder that does show
that, okay.
Um, You know, 45% are passinglike some of the costs.
Where are the other 55% doing?
(15:05):
What we've kind of have seen thepast few months is that we
haven't seen a lot of passthrough.
To the consumer yet.
There's only a handful of goodsright now where we've seen some
price impacts.
So I talk, you know, there'scertain food products audio
equipment.
Um, Ha really had a very largejump in the CPI close to 10%
(15:27):
over the past month.
and sporting goods was alsoanother sector as well that saw
some price growth.
But other than a few, a handfulof some of those consumer goods,
we haven't seen a lot of fullpass through to the consumer
yet.
Now the question is why?
Well, first of all the tariffpolicy, there's so much
uncertainty around it.
The policy changes every otherweek.
(15:48):
If you were a firm, it's kind ofhard to make pricing decisions
in that environment.
And then the other issue.
Is that a lot of these firmsoperate on a contract basis,
right?
They've already locked in theircontracts for the year.
The prices are what they are fornow.
So what I think this means isthat we should expect for lot of
these goods, considerable lag interms of when the costs that
(16:10):
businesses are incurring arefinally passed on to the
consumer.
And of course, I do wannaemphasize here that even if the
firm.
Absorbs some of the costs of thetariffs.
That is not a good outcomebecause that entails less money
for investment in theirbusiness, fewer jobs that are
(16:31):
created.
It's not really the case that.
Just because it's not all thatis not being passed on the
consumer that this is a goodoutcome because that still means
that American businesses arebearing the cost and that does
have impacts on theirinvestment.
This is gonna be reallydifficult for economists.
(16:51):
Academics to really I thinkdisentangle the impacts of the
tariffs from other things thathave been going on in the
economy this year.
Specifically the fact that wedid just pass a very large tax
cut that has a lot of pro-growthbusiness provisions on the
investment side.
(17:12):
So in one sense.
You have this, constellation ofpolicies that is going to boost
investment.
I mean, You have the tariffs,which are going to a depressed
investment.
So what's interesting is that onthe whole it is possible that
even with the tariffs and theuncertainty that investment.
Altogether on net could increasethis year because of the tax
cut, because of the tax cut onnet.
(17:33):
But it's really hard to say thatdefinitively right now.
And you know, of course I thinkit's important for listeners to
understand that while most ofthe reciprocal tariff increases
did go into effect.
yesterday there was stillconsiderable uncertainty around
the tariff levels.
So right now China is facing a30% tariff By August 12th,
(17:57):
they're sch they're scheduled toface 125% tariff.
the, the pause on the 125%tariff that will likely be
extended, perhaps another 90days.
China tariffs will likely remainat 30% for the foreseeable
future.
this is just another example ofjust the increasing uncertainty
that this administration isgenerating.
(18:17):
And of course, as far as itrelates to trade deals, the
trade deals, which we could alsoget into in a
Kyle Hulehan (18:21):
Right.
Alex Durante (18:22):
no, no one really has any sense I think of really
what to expect going forward.
Other than that, there are goingto be higher tariffs than there
were.
Pre January, 2025.
Kyle Hulehan (18:32):
And, you know, I, I, I think it, it's good to
point out here, especially withthe business angle, is, yeah,
there are some businesses, bigbusinesses maybe that can absorb
these things.
But that's like Google and Appleand like giant, major companies.
A lot of companies don't havesuch huge margins that they're
operating.
Alex Durante (18:48):
the situation is even worse than you make it out
to because not only can thosecompanies absorb the tariffs,
but they can also go to thepresident and lobby for
Kyle Hulehan (18:58):
Yeah.
Alex Durante (18:58):
Which we are seeing some of, and that's not
good either.
I mean, I we don't want to livein a country that has these
kinds of crony capitalistpolicies.
This is how policymaking worksin certain populous countries
like in, in South America whereit's like, if you want a certain
exemption, or you want a certainsubsidy or benefit, you know,
you go to the president andbanking for that, for that
(19:20):
subsidy or exemption fromsomething.
But this is in general not how Ithink the US economy should
function.
And that's a whole other realmof.
But the lobbying cost, issomething that, we don't even
consider in our estimates andthat other groups don't
consider, and that's justanother cost of the
Kyle Hulehan (19:36):
Mm.
No, I mean, yeah, that's reallya very good point.
Yeah.
And I think, I, I guess when itcomes to all this with the
rebates and the things we'retalking about here, isn't
proposing a rebate, basicallyjust admitting tariffs, herd
consumers, and, you know, you'rejust trying to hand the money
back to them.
Alex Durante (19:51):
Like, like I said I, I agree, but I think, you
know, the administration they'recoming up with some clever ways,
trying to.
You know, wiggle out that one.
And it's mostly, again juststraight up, basically just
lying about who is paying thetariffs.
And one other thing I would sayon this, because the treasury
secretary.
Said something to this effect, Ithink yesterday or perhaps
earlier this week.
But, he was asserting, whichagain is just in fact not true.
(20:13):
If you look at the data thatwell actually what's happening,
so he claimed is that, oh, well,the exporters are actually
lowering the pre tariff priceand then tacking the tariff on.
So actually.
It's the foreign firms that arebearing the costs of the
tariffs.
And the idea being that theydon't wanna lose market share,
so they can't fully pass alongthe tariffs.
(20:35):
So what they do is they lowerthe price of the good attack,
attack the tariff on, and thenthe importing firm is allegedly,
insulated from those costs.
But the problem with this isthat if you look.
the pre tariff, import pricesfor all these goods and compare
it.
If you just look at the trendand compare it to last year
(20:55):
import prices are actuallyslightly up.
it's just not true you know thatthe exporters are lowering their
prices.
When they sell their goods toAmericans, that is just
emphatically not true, and it'sjust not in, in the data.
And as long as that is not thecase, that does mean that it is
(21:16):
Americans that are bearing thecost of the tariff and not
foreigners.
Kyle Hulehan (21:20):
And I know in 2018 and 2019, what happened was US
farmers lost$27 billion and thenwe sent out$28 billion in.
Alex Durante (21:29):
The tariffs back then raised about 70 or 80
billion, and maybe about half ofthat was used to bail out the
farmers because they were hurt.
By the retaliatory tariffs thatother countries impose on us.
And it doesn't really see, Imean, I have not heard, well, I
mean, first of all, we haven'tseen a whole lot of retaliation
in general.
I'm not entirely sure that theadministration is gonna be up
(21:49):
for doing another bailout ofthat kind.
Depending on how much, you know,the farmers are affected.
But yeah, that is true.
Like that was what.
Curiously, the revenue back thenwas used for, and again, this
kind of just relates to you endup, you're just playing a game
of whack-a-mole, essentially,right?
You implement one policy,creates another bad, downstream
outcomes, but you have to, tryto plug that one that creates
(22:11):
other, bad outcomes.
Kyle Hulehan (22:13):
Yeah.
Alex Durante (22:14):
yeah, so this but yeah, that, that is, I think
that is a good, an interestingpoint.
Kyle Hulehan (22:17):
our producer Dan said, you know, when the only
tool you have is a hammer,everything looks like a nail.
And it seems like they feel liketariffs are the hammer, and
we're just gonna, this is whatwe're.
Alex Durante (22:26):
this is the funny thing about it too.
I mean, again, a lot of thepolicies themselves, are in
contradiction, right?
Which I also talk about in mypiece.
Because, on one hand theyassert, tariffs are great.
They're gonna bring in all thisrevenue, but on the other hand,
they keep saying, oh, it's anegotiating tool.
It's only gonna be a temporarypolicy.
If that's the case, and thatmeans the tariffs.
Won't bring in as much revenue,you know, as you're claiming.
(22:46):
Now, what's actually interestingabout this is that they are sort
of splitting the differencethere because all of the deals
that have been nego negotiatedstill leave higher tariffs in
place than we had pre January.
So like there are, so thetariffs in once they're sort of
being used to negotiate and.
Raise revenue.
Just the revenue is not, at thescale of what was originally
(23:10):
claimed several months ago,which is, if you recall, I think
Pier Navarro was claimingsomething like 6 trillion, over
10.
And that's just again not whatwe're, not what we're seeing and
not what us and other groups areforecasting.
Kyle Hulehan (23:23):
So, yeah, if, if tariffs are supposed to help.
Pay down the deficit.
How do the rebates fit into themath?
Alex Durante (23:29):
that's exactly my point.
the administration, complained alot about how, you know, the one
big beautiful bill was not goingto increase deficits that much
because of the tariff revenue.
And look, it is true that thetariffs have been raising some
revenue and, we estimate that.
Over the next decade, they willraise about 2.4 trillion
(23:49):
dollars, and that's beforecounting accounting for the
negative economic impacts ofthem.
And then when you account forthat, you're actually under$2
trillion in revenue.
And that would bring down thecost.
Of the bill somewhat, but none.
But nonetheless, it would stillbe increasing bill.
I mean, My preference would beto, eliminate the tariffs then
(24:11):
to account for the increase inthe deficit forecast that would
occur if you did that, you wouldhave to look for pursue spending
cuts elsewhere, which I thinkwould be very good.
Or.
Pursue other revenue raisingpolicies, which might include
reversing some of the so progrowth elements that were part
(24:31):
of the one big beautiful bill.
Perhaps the only slightly Okay.
Thing I could say about tariffs,you know, is that they are, they
at least bring in some revenue,which does help reduce the cost
of the tax bill that is passed.
But as I also say in my piece,is this an, an efficient way,
Kyle Hulehan (24:47):
Hmm.
Alex Durante (24:48):
Raise revenue?
I think not.
Kyle Hulehan (24:50):
what does this all say about where you think tariff
policy is heading?
Where's it going right now?
Alex Durante (24:55):
Well, let's see here.
So as I stated um, a couple ofdeadlines to keep in mind.
August 12th is supposed to be.
the deadline for the Chinareciprocal tariffs to 125% that
will likely be extended.
So I think China tariffs willremain at 30% in the near term
at the end of the month August29th.
Di minimis import exemption isscheduled to go away.
(25:19):
And what that does is forimports that are less than$800
they don't have to get clearedthrough customs.
They don't face tariffs.
This.
You could think of.
I mean, really good examples ofthis are, the kind of the fast
fashion industry.
Temu, Xen these are a lot of thekinds of imports that are coming
(25:40):
through di minimis and notcurrently, well, actually that's
not quite true because the Chinadi Minims did go away back in
May but di minimus in all othercountries.
is scheduled to go away in atthe end of the month, and that's
mostly gonna affect places likeVietnam Mexico Canada to some
extent.
But you know, that's also gonnabe another pretty large
potentially tax hike, onconsumers.
(26:02):
That's another thing to keep inmind.
And then it's also possible thatnext week, we will be getting
pharmaceutical tariffs allegedlyas high as 250%.
We will potentially also begetting semiconductor tariffs as
high as a hundred percent.
Allegedly, a lot of thesecountries that, I mean, they are
trying to some kind ofsettlement, some kind of
(26:23):
negotiation with the presidentto potentially lower tariffs.
I, I am not really optimisticthat these deals are going to
go, the negotiations are goingto go all that.
Well, they're really not goingwell as it is.
I mean, I believe Brazil today,or yesterday just straight up
said that they just they don'twanna negotiate with the
president.
They just, they don't have theway earth wherewithal and the
energy to deal with the chaos,you know?
(26:43):
and the fact that the us, reallyin a lot of these instances is
not.
Really able to effectivelyarticulate what it is they're a,
what concessions they'reactually trying to extract from
some of these countries
Kyle Hulehan (26:54):
And honestly what it feels like, and we talked
about this, it feels like thetariffs are just like vibes
almost.
Like it's just a little bit likewe're, we're, we're pulling in
on something, we're pushing inon something, we're, here's this
policy, and then we take it awayand it's.
Alex Durante (27:05):
the vibe seem to be signaling that the president
is trying to move.
the baseline tariff rate higher.
So right now, we had a 10%baseline tariff that was in
effect.
Really since April it's stillmany countries around the world
are still paying that 10% rate,but then some of these new
reciprocal tariffs which coversabout.
know about much more than 80countries, I believe.
(27:28):
Those tariffs are ranging fromlike 15 to 20%.
There is all, and again, likeit's possible that the baseline
rate in all those othercountries also moves upward to
15%.
But if you look at our latestestimates, we pretty much find
that the average.
Apply.
The tariff right now isbasically 20%, and that's, you
know, an average of all thecountries.
(27:48):
And that seems to just be, wherethings are going in general.
Kyle Hulehan (27:52):
Alex, thank you so much for being on the show today
and talking about all of this.
This is a, it's a complicated,messy situation right now, and
there's, it's ever changing.
And I know, we'll, we'll betalking about tariffs again
'cause we always talk abouttariffs on this show.
I, I do wanna ask is, is thereanything else that you wanna hit
on this topic or any work thatyou're doing that you wanna plug
right now?
Alex Durante (28:10):
I am planning to a blog post that will explore the
impacts of tariffs on thepharmaceutical industry.
So that's one thing to keep outfor.
But other than that, I mean,I'm, you know, doing my best to
monitor the situation, updateour tariff tracker on our
website regularly.
And it's that's certainly, youknow, con consuming a lot of my
time these days.
But, you know, it's importantthat policy makers and Americans
(28:32):
are aware of the impacts aspolicies continuing to have on
the economy.
Kyle Hulehan (28:36):
And thank you Alex, for being on the show.
So before we sign off realquick, if you have any burning
questions on taxes, you can send'em ra drop a comment on
YouTube.
You can email us atpodcast@taxfoundation.org or you
can slide into our dms onTwitter.
Thank you for listening.
Hello and welcome to the Deduction of Tax
Foundation Podcast.
I'm your host, Kyle Houlahan,and we are back with another
episode.
And we are joined by AlexDurante, senior Economist at the
Tax Foundation.
Now, Alex, we are here to talkabout.
Tariffs, uh, tariffs are back inthe news again.
Unsurprisingly, we love to talkabout tariffs on this podcast.
(00:20):
So you recently had a piece thatwas about food imports getting
hit by tariffs.
Could you walk us through that?
Alex Durante (00:27):
So the way that tariffs impact, the food and
agricultural sector is a littlebit different than how they
impact, the manufacturingsector.
When a foreign imported good isfacing, um, a tariff, like a, a
type of manufacturing input theimporter has a couple of
different options there, right?
They could just continue, toimport the good from abroad and
pay that higher tariff price.
(00:49):
Or they could switch to adomestic supplier.
And if they do that, they wouldstill be.
They would still be paying ahigher price than they would be
in the world in which thetariffs didn't exist.
But they would be somewhatinsulated from the full tariff
price increase.
But with the agriculturalsector, it's a little bit
different.
Because in many of those casesthere really isn't a viable
(01:11):
domestic supplier that'savailable.
And I think the reason, forthat, should be pretty obvious,
which is that there's justsimply certain foods that.
We can't grow in the US and tothe extent that we can we can't
grow them enough to meetconsumer demand.
two examples I'll give, which Italk about in my piece.
So, so one is uh, bananas.
Most bananas.
(01:33):
They're consumed in the us areimported mostly from Central
America, specifically Guatemala,and we only grow bananas in two
places in the US that's inFlorida that's in, in Hawaii.
There really is no.
Viable situation in which those,plantations there are going to
be able to increase, theirsupply of bananas so much to be
(01:56):
able to meet consumer demand.
So in that case the importer, orrather the consumer in this
case, I mean, they really, thefinal consumer like us, at the
grocery store.
We really have no choice but tocontinue to import bananas from
abroad.
Then pay higher prices forthose.
And then the other example I'llgive to illustrate this is
(02:16):
coffee.
And right now coffee, which isactually one of the largest food
imports that is facing tariffs.
We get a lot of coffee.
from around the world especiallyBrazil, which is currently
facing a 50% tariff.
And although there was a, anexemptions list that was
released for Brazil, that listincluded orange juice and Brazil
(02:39):
nuts in terms of food productsthat were exempt, but it did not
include coffee.
As it comes to coffee.
there are certain places in theUS where coffee is grown.
But there's a significant lagtime in terms of how long it
takes those coffee plants tomature and they actually have a
viable product.
So there again, it's just notsimply the case that we can
replace farm production withdomestic production.
(03:03):
And then one other thing I'lladd that sort of complicates the
story even more.
Is that we're all, we also haveto account for the fact, that
consumers have certain tastesand preferences for certain
kinds of food imports.
So one example of this isEuropean wines and spirits
specifically.
Those are gonna be facing 15%tariffs.
(03:23):
And th and there are a very.
food import for the US now Sure.
Could us, you know, could USconsumers, could they switch to
wines, say that are producingCalifornia?
Sure they could do that.
But you know, if they have aspecific taste for French wine,
let's say you can't grow Frenchwine.
(03:43):
In the US or else it ceases tobe French wine.
So when you account for some ofthose tastes and preferences
while it is possible thatconsumers will switch to some
more domestic brands andvarieties really depends on what
their tastes and preferencesare.
And in that, and in those cases,they might simply just have at
no point, or no other solutionthat they really like.
(04:03):
French wine to just continue tobuy French wine at the higher
tariff price.
Kyle Hulehan (04:08):
So I gotta ask now that you're, talking about
coffee and wine and what's your,do you have a coffee of choice?
Do you, are you a coffeedrinker?
Will this affect you?
Alex Durante (04:16):
I am a coffee drinker.
I, I do like my coffee.
I am.
I would not say myself.
I am particularly loyal to anybrands in particular.
But that doesn't necessarilymean that I won't be affected.
Because again, coffee is apretty significant.
import for the US and a lot ofit is, you know, coming from
South America, some of it'scoming from Southeast Asia as
(04:37):
well, like Indonesia.
I, I, I imagine that given thatI am a drinker of coffee, I will
probably be affected
Kyle Hulehan (04:42):
it's a little funny'cause I feel like that
goes against a little bitagainst TF culture.
I feel like we have a lot oflike coffee heads, people
really, like, they know theirthing.
So they'll definitely beaffected, some of our staff.
But I wanna follow up here withdo you feel like pharmaceuticals
are getting caught up in this?
'cause I heard something aboutthat.
Alex Durante (04:59):
So we have been hearing rumblings that
pharmaceutical imports would befacing potentially tariffs up to
250% potentially starting nextweek.
Although we haven't been given afirm deadline on this, we also
haven't been given.
Any kind of indication of whatkinds of products that would
include.
Right now, for me, it's reallyhard to understand what the
(05:22):
justification is for doing thiskind of policy.
Now, I would imagine that theadministration is making the
argument that well.
There's a lot of pharmaceuticalimports that we get from places
like China.
Should some kind of hot warbreakout between the US and
China perhaps it would not, youknow, it might not be the best
idea for them to have access toall these critical supplies.
(05:46):
And in that case it would bebetter to have all those supply
chains concentrated.
In the US now, I will grantthere, there is potentially a
national security risk there,but I think what needs to be
highlighted is that havingsupply chains concentrate in the
US is not a good way todiversify your risk.
(06:06):
And, I'm remiss to even bring upCOVID because I think it's a
period of time with all
Kyle Hulehan (06:10):
Yeah.
Alex Durante (06:11):
frankly just forget about.
Kyle Hulehan (06:12):
Yeah.
Alex Durante (06:13):
came up, five years ago.
I think what we learned is that,from that experience that um,
just because you have all yoursupply chains in the US doesn't
mean you're insulated.
From a pandemic, because we hadmany, plants that were shut
down, as the virus wasspreading.
What would make more sense and Ithink be a better alternative to
taring?
(06:33):
These goods, if we wannadiversify supply chains, would
be to simply negotiate morekinds of free trade agreements
with other countries.
in order to continue to importthis critical good cheaply, but
also kind of not have that Chinaexposure that people are
concerned about.
it could be, we do more importspharmaceuticals from Vietnam
(06:55):
even India or Mexico.
To me that the president'sapproach here, I think as it
relates to pharmaceuticalimports is very.
very misguided and this is gonnahave impose some pretty
significant costs on thatindustry and, likely risk
increasing the cost of drugs eeven more, which again,
contradicts.
I think a lot of what thisadministration has said about
(07:17):
how they want to work onimplementing policies that lower
drug prices this would not be apolicy to do that.
Kyle Hulehan (07:24):
it doesn't seem like anything that involves
tariffs involves lower orcheaper.
And I want to touch on one thingreal quick.
I think to kind of give a peoplea broad overview of, as we're
talking about these food tariffsand the pharmaceutical tariffs
is in your blog, you had thischart that showed that.
The tariff imports will affect75% of food imports.
(07:47):
Is that correct?
Alex Durante (07:48):
so the reason it's
Kyle Hulehan (07:49):
I.
Alex Durante (07:49):
A hundred percent is because they are, because
U-S-M-C-A, so this was the tradeagreement that we signed with
Canada and Mexico during Trump'sfirst term, which was a
renegotiation of a trade deal,NAFTA that we signed in the
nineties.
that agreement covered manytypes of food imports.
And under the IEP tariffs thatare currently in place,
U-S-M-C-A covered goods areexempt from those tariffs.
(08:13):
Which does cover a pretty broad.
Class of food imports, but itdoes not it does not cover, it
does not cover everything.
So it's not contrary to I thinkwhat a lot of people had.
I think it thought it's notreally, it's not entirely the
case.
That we are totally insulatedfrom the tariffs because of
these exemptions.
Because there are a handful offood products from, from Canada,
(08:36):
Mexico that are still facing thetariffs.
But nonetheless the fact thatthose exemptions are there, are
providing, some relief toconsumers, which I think is a
good thing.
Kyle Hulehan (08:46):
Yeah, but it could be nice to not have them at all.
That would be nice.
Alex Durante (08:49):
Ideally we I would prefer, and I'm sure many other
people prefer to not have the,to not have
Kyle Hulehan (08:54):
Yeah.
Alex Durante (08:55):
Yes,
Kyle Hulehan (08:56):
So to kind of just switch gears here, uh, you know,
there was this other proposaloffered, which is, uh, Senator
Hawley proposed tariff rebates,uh, which does not sound like
the best idea to me.
Could, could you talk to usabout that?
Alex Durante (09:10):
Tariff revenue has brought in about
Kyle Hulehan (09:12):
I.
Alex Durante (09:13):
billion so far.
And Senator Hawley's proposal,which was also floated by Trump
the week prior to that billbeing introduced was to return
some of those proceeds to, theAmerican consumer in the form of
a tax credit that they would beable to claim in advance of
filing season.
(09:34):
This would be very muchanalogous to the stimulus checks
that were passed during COVID.
And so it would have the samephase outs.
So not everyone would get thesame, rebate.
The rebate based on current.
Revenue levels would be about$600 per filer and per dependent
(09:55):
in the household, per qualifyingdependent.
And as part of his bill tax thatnumber would rise as more
revenue is brought in over thecourse of the year.
Now, I am certainly, in favorof.
Relief for consumers from thetariffs.
And in fact, I think, this ifthat was really what we were
trying to do with this policy, Ithink the simplest way to do
(10:16):
that would be to just not havethe tariffs.
People have asked me, certainlyreporters and other folks, is
this sort of an admission by theadministration.
Like, oh, the tariffs actuallyare affected consumers, and to
me it seems that the way they'rekind of trying to spin this.
Is that they sort of just liereally about who is actually
(10:37):
paying the tariffs.
So they will assert that it is aforeign firm, sometimes even
foreign governments that are,which is just not true, that are
paying the tariffs and then theytake, this pool of money and
say, oh, like, isn't it sogreat?
That these tariff policies arebringing all this revenue, as a
gesture of goodwill, we shouldreturn this, to the American
people.
(10:57):
there's actually three problemswith this that I'm gonna, I'm
gonna get into.
So I'm not a fan of the policythough.
I would prefer that they are.
repealed.
But the way I see, you know, aslong as we're going to have
tariffs, which I think is gonnabe the case, at least for the
next four years or certainlytariffs this high, as long as
we're going to have them and wehave this, and this looming
fiscal crisis and, which wasexacerbated, by the deficit
(11:21):
financed tax bill, the one bigbeautiful bill act that was just
passed as long as we haveincreasing deficits and rising
interest costs as well.
It would be more sensible to usethe revenue for reducing
deficits than to simply sendstimulus checks to taxpayers.
(11:44):
the second problem with thepolicy which is curious because
if you recall, you know, duringpresident Biden's
administration, Trump and otherand other members of the
Republican party frequentlyrailed against the stimulus
checks because they wereconcerned about that that policy
increasing inflation.
that is essentially whathappened.
(12:06):
I mean, you we had a restrictedsupply chain because of the
COVID shock, right?
And then we were injectingmoney.
Into the economy, which is arecipe for creating inflation.
Inflation is still running.
bit high.
I mean, It's pretty close to 3%.
Generally when economists thinkof implementing stimulative
policies, it's typically duringan economic downturn.
(12:28):
it does not appear that we arecurrently in an economic
recession.
And therefore it's really hardto see what the need for this
stimulus policy is.
And then the final point that Iwould I would like to make here
as well is that.
What's interesting about this isthat although the rebates would
(12:51):
go to consumers but right nowit's primarily the importing
firm, which is the business thathas been paying.
been paying the tariff, right?
We've only seen a little bit sofar of consumer price impacts.
to me, if you were to do arebate, it seems that you would
want to be reating the, again,if you were trying to, you, you
(13:13):
wanna be reating this, to thefirm, that's actually, the firms
are actually paying the tariffBut of course, as I said, the
point of the policy is not toreduce.
Consumer harm because theadministration does not admit or
acknowledge that consumers andbusinesses and firms are harmed
by this policy.
Kyle Hulehan (13:29):
so.
What does this mean forbusinesses then, especially,
like small businesses, like arestaurant that's, now paying
more for ingredients and there'sno relief side, you know?
Alex Durante (13:39):
So, this is kind of the issue that I think is
really on everyone's mind, Whereare the impacts of the tariffs
going to be on the consumer, thefinal consumer at the point of
sale, you know, like at thegrocery store?
And the answer right now is it'sa bit complicated.
It's primarily the importingfirm, the wholesaler that's
paying the tariff.
Now they have a couple ofdifferent options there, right?
(14:01):
They could.
pass along the tariff to theconsumer.
Or they could pass along some ofit and then absorb the rest of
it.
And what's interesting is thatif you look at some of the
evidence we have of this so far,so back in May, the federal
Reserve Bank of New York fieldof the survey.
Now of course this is before alot, this is before a lot of the
(14:23):
largest tariffs went intoeffect, which happened
yesterday.
Right?
So this is when.
Most countries were facing a 10%baseline tariff.
And then Canada, China, andMexico were facing higher
tariffs.
And what that survey found, theyasked firms, how are you
responding to the tariffs?
And what they found was thatabout 45% of firms they surveyed
(14:44):
indicated they passed along atleast some of the cost to
consumers.
another third said they hadfully passed along the costs to
consumers.
Now that survey does leave, doesmake one wonder that does show
that, okay.
Um, You know, 45% are passinglike some of the costs.
Where are the other 55% doing?
(15:05):
What we've kind of have seen thepast few months is that we
haven't seen a lot of passthrough.
To the consumer yet.
There's only a handful of goodsright now where we've seen some
price impacts.
So I talk, you know, there'scertain food products audio
equipment.
Um, Ha really had a very largejump in the CPI close to 10%
(15:27):
over the past month.
and sporting goods was alsoanother sector as well that saw
some price growth.
But other than a few, a handfulof some of those consumer goods,
we haven't seen a lot of fullpass through to the consumer
yet.
Now the question is why?
Well, first of all the tariffpolicy, there's so much
uncertainty around it.
The policy changes every otherweek.
(15:48):
If you were a firm, it's kind ofhard to make pricing decisions
in that environment.
And then the other issue.
Is that a lot of these firmsoperate on a contract basis,
right?
They've already locked in theircontracts for the year.
The prices are what they are fornow.
So what I think this means isthat we should expect for lot of
these goods, considerable lag interms of when the costs that
(16:10):
businesses are incurring arefinally passed on to the
consumer.
And of course, I do wannaemphasize here that even if the
firm.
Absorbs some of the costs of thetariffs.
That is not a good outcomebecause that entails less money
for investment in theirbusiness, fewer jobs that are
(16:31):
created.
It's not really the case that.
Just because it's not all thatis not being passed on the
consumer that this is a goodoutcome because that still means
that American businesses arebearing the cost and that does
have impacts on theirinvestment.
This is gonna be reallydifficult for economists.
(16:51):
Academics to really I thinkdisentangle the impacts of the
tariffs from other things thathave been going on in the
economy this year.
Specifically the fact that wedid just pass a very large tax
cut that has a lot of pro-growthbusiness provisions on the
investment side.
(17:12):
So in one sense.
You have this, constellation ofpolicies that is going to boost
investment.
I mean, You have the tariffs,which are going to a depressed
investment.
So what's interesting is that onthe whole it is possible that
even with the tariffs and theuncertainty that investment.
Altogether on net could increasethis year because of the tax
cut, because of the tax cut onnet.
(17:33):
But it's really hard to say thatdefinitively right now.
And you know, of course I thinkit's important for listeners to
understand that while most ofthe reciprocal tariff increases
did go into effect.
yesterday there was stillconsiderable uncertainty around
the tariff levels.
So right now China is facing a30% tariff By August 12th,
(17:57):
they're sch they're scheduled toface 125% tariff.
the, the pause on the 125%tariff that will likely be
extended, perhaps another 90days.
China tariffs will likely remainat 30% for the foreseeable
future.
this is just another example ofjust the increasing uncertainty
that this administration isgenerating.
(18:17):
And of course, as far as itrelates to trade deals, the
trade deals, which we could alsoget into in a
Kyle Hulehan (18:21):
Right.
Alex Durante (18:22):
no, no one really has any sense I think of really
what to expect going forward.
Other than that, there are goingto be higher tariffs than there
were.
Pre January, 2025.
Kyle Hulehan (18:32):
And, you know, I, I, I think it, it's good to
point out here, especially withthe business angle, is, yeah,
there are some businesses, bigbusinesses maybe that can absorb
these things.
But that's like Google and Appleand like giant, major companies.
A lot of companies don't havesuch huge margins that they're
operating.
Alex Durante (18:48):
the situation is even worse than you make it out
to because not only can thosecompanies absorb the tariffs,
but they can also go to thepresident and lobby for
Kyle Hulehan (18:58):
Yeah.
Alex Durante (18:58):
Which we are seeing some of, and that's not
good either.
I mean, I we don't want to livein a country that has these
kinds of crony capitalistpolicies.
This is how policymaking worksin certain populous countries
like in, in South America whereit's like, if you want a certain
exemption, or you want a certainsubsidy or benefit, you know,
you go to the president andbanking for that, for that
(19:20):
subsidy or exemption fromsomething.
But this is in general not how Ithink the US economy should
function.
And that's a whole other realmof.
But the lobbying cost, issomething that, we don't even
consider in our estimates andthat other groups don't
consider, and that's justanother cost of the
Kyle Hulehan (19:36):
Mm.
No, I mean, yeah, that's reallya very good point.
Yeah.
And I think, I, I guess when itcomes to all this with the
rebates and the things we'retalking about here, isn't
proposing a rebate, basicallyjust admitting tariffs, herd
consumers, and, you know, you'rejust trying to hand the money
back to them.
Alex Durante (19:51):
Like, like I said I, I agree, but I think, you
know, the administration they'recoming up with some clever ways,
trying to.
You know, wiggle out that one.
And it's mostly, again juststraight up, basically just
lying about who is paying thetariffs.
And one other thing I would sayon this, because the treasury
secretary.
Said something to this effect, Ithink yesterday or perhaps
earlier this week.
But, he was asserting, whichagain is just in fact not true.
(20:13):
If you look at the data thatwell actually what's happening,
so he claimed is that, oh, well,the exporters are actually
lowering the pre tariff priceand then tacking the tariff on.
So actually.
It's the foreign firms that arebearing the costs of the
tariffs.
And the idea being that theydon't wanna lose market share,
so they can't fully pass alongthe tariffs.
(20:35):
So what they do is they lowerthe price of the good attack,
attack the tariff on, and thenthe importing firm is allegedly,
insulated from those costs.
But the problem with this isthat if you look.
the pre tariff, import pricesfor all these goods and compare
it.
If you just look at the trendand compare it to last year
(20:55):
import prices are actuallyslightly up.
it's just not true you know thatthe exporters are lowering their
prices.
When they sell their goods toAmericans, that is just
emphatically not true, and it'sjust not in, in the data.
And as long as that is not thecase, that does mean that it is
(21:16):
Americans that are bearing thecost of the tariff and not
foreigners.
Kyle Hulehan (21:20):
And I know in 2018 and 2019, what happened was US
farmers lost$27 billion and thenwe sent out$28 billion in.
Alex Durante (21:29):
The tariffs back then raised about 70 or 80
billion, and maybe about half ofthat was used to bail out the
farmers because they were hurt.
By the retaliatory tariffs thatother countries impose on us.
And it doesn't really see, Imean, I have not heard, well, I
mean, first of all, we haven'tseen a whole lot of retaliation
in general.
I'm not entirely sure that theadministration is gonna be up
(21:49):
for doing another bailout ofthat kind.
Depending on how much, you know,the farmers are affected.
But yeah, that is true.
Like that was what.
Curiously, the revenue back thenwas used for, and again, this
kind of just relates to you endup, you're just playing a game
of whack-a-mole, essentially,right?
You implement one policy,creates another bad, downstream
outcomes, but you have to, tryto plug that one that creates
(22:11):
other, bad outcomes.
Kyle Hulehan (22:13):
Yeah.
Alex Durante (22:14):
yeah, so this but yeah, that, that is, I think
that is a good, an interestingpoint.
Kyle Hulehan (22:17):
our producer Dan said, you know, when the only
tool you have is a hammer,everything looks like a nail.
And it seems like they feel liketariffs are the hammer, and
we're just gonna, this is whatwe're.
Alex Durante (22:26):
this is the funny thing about it too.
I mean, again, a lot of thepolicies themselves, are in
contradiction, right?
Which I also talk about in mypiece.
Because, on one hand theyassert, tariffs are great.
They're gonna bring in all thisrevenue, but on the other hand,
they keep saying, oh, it's anegotiating tool.
It's only gonna be a temporarypolicy.
If that's the case, and thatmeans the tariffs.
Won't bring in as much revenue,you know, as you're claiming.
(22:46):
Now, what's actually interestingabout this is that they are sort
of splitting the differencethere because all of the deals
that have been nego negotiatedstill leave higher tariffs in
place than we had pre January.
So like there are, so thetariffs in once they're sort of
being used to negotiate and.
Raise revenue.
Just the revenue is not, at thescale of what was originally
(23:10):
claimed several months ago,which is, if you recall, I think
Pier Navarro was claimingsomething like 6 trillion, over
10.
And that's just again not whatwe're, not what we're seeing and
not what us and other groups areforecasting.
Kyle Hulehan (23:23):
So, yeah, if, if tariffs are supposed to help.
Pay down the deficit.
How do the rebates fit into themath?
Alex Durante (23:29):
that's exactly my point.
the administration, complained alot about how, you know, the one
big beautiful bill was not goingto increase deficits that much
because of the tariff revenue.
And look, it is true that thetariffs have been raising some
revenue and, we estimate that.
Over the next decade, they willraise about 2.4 trillion
(23:49):
dollars, and that's beforecounting accounting for the
negative economic impacts ofthem.
And then when you account forthat, you're actually under$2
trillion in revenue.
And that would bring down thecost.
Of the bill somewhat, but none.
But nonetheless, it would stillbe increasing bill.
I mean, My preference would beto, eliminate the tariffs then
(24:11):
to account for the increase inthe deficit forecast that would
occur if you did that, you wouldhave to look for pursue spending
cuts elsewhere, which I thinkwould be very good.
Or.
Pursue other revenue raisingpolicies, which might include
reversing some of the so progrowth elements that were part
(24:31):
of the one big beautiful bill.
Perhaps the only slightly Okay.
Thing I could say about tariffs,you know, is that they are, they
at least bring in some revenue,which does help reduce the cost
of the tax bill that is passed.
But as I also say in my piece,is this an, an efficient way,
Kyle Hulehan (24:47):
Hmm.
Alex Durante (24:48):
Raise revenue?
I think not.
Kyle Hulehan (24:50):
what does this all say about where you think tariff
policy is heading?
Where's it going right now?
Alex Durante (24:55):
Well, let's see here.
So as I stated um, a couple ofdeadlines to keep in mind.
August 12th is supposed to be.
the deadline for the Chinareciprocal tariffs to 125% that
will likely be extended.
So I think China tariffs willremain at 30% in the near term
at the end of the month August29th.
Di minimis import exemption isscheduled to go away.
(25:19):
And what that does is forimports that are less than$800
they don't have to get clearedthrough customs.
They don't face tariffs.
This.
You could think of.
I mean, really good examples ofthis are, the kind of the fast
fashion industry.
Temu, Xen these are a lot of thekinds of imports that are coming
(25:40):
through di minimis and notcurrently, well, actually that's
not quite true because the Chinadi Minims did go away back in
May but di minimus in all othercountries.
is scheduled to go away in atthe end of the month, and that's
mostly gonna affect places likeVietnam Mexico Canada to some
extent.
But you know, that's also gonnabe another pretty large
potentially tax hike, onconsumers.
(26:02):
That's another thing to keep inmind.
And then it's also possible thatnext week, we will be getting
pharmaceutical tariffs allegedlyas high as 250%.
We will potentially also begetting semiconductor tariffs as
high as a hundred percent.
Allegedly, a lot of thesecountries that, I mean, they are
trying to some kind ofsettlement, some kind of
(26:23):
negotiation with the presidentto potentially lower tariffs.
I, I am not really optimisticthat these deals are going to
go, the negotiations are goingto go all that.
Well, they're really not goingwell as it is.
I mean, I believe Brazil today,or yesterday just straight up
said that they just they don'twanna negotiate with the
president.
They just, they don't have theway earth wherewithal and the
energy to deal with the chaos,you know?
(26:43):
and the fact that the us, reallyin a lot of these instances is
not.
Really able to effectivelyarticulate what it is they're a,
what concessions they'reactually trying to extract from
some of these countries
Kyle Hulehan (26:54):
And honestly what it feels like, and we talked
about this, it feels like thetariffs are just like vibes
almost.
Like it's just a little bit likewe're, we're, we're pulling in
on something, we're pushing inon something, we're, here's this
policy, and then we take it awayand it's.
Alex Durante (27:05):
the vibe seem to be signaling that the president
is trying to move.
the baseline tariff rate higher.
So right now, we had a 10%baseline tariff that was in
effect.
Really since April it's stillmany countries around the world
are still paying that 10% rate,but then some of these new
reciprocal tariffs which coversabout.
know about much more than 80countries, I believe.
(27:28):
Those tariffs are ranging fromlike 15 to 20%.
There is all, and again, likeit's possible that the baseline
rate in all those othercountries also moves upward to
15%.
But if you look at our latestestimates, we pretty much find
that the average.
Apply.
The tariff right now isbasically 20%, and that's, you
know, an average of all thecountries.
(27:48):
And that seems to just be, wherethings are going in general.
Kyle Hulehan (27:52):
Alex, thank you so much for being on the show today
and talking about all of this.
This is a, it's a complicated,messy situation right now, and
there's, it's ever changing.
And I know, we'll, we'll betalking about tariffs again
'cause we always talk abouttariffs on this show.
I, I do wanna ask is, is thereanything else that you wanna hit
on this topic or any work thatyou're doing that you wanna plug
right now?
Alex Durante (28:10):
I am planning to a blog post that will explore the
impacts of tariffs on thepharmaceutical industry.
So that's one thing to keep outfor.
But other than that, I mean,I'm, you know, doing my best to
monitor the situation, updateour tariff tracker on our
website regularly.
And it's that's certainly, youknow, con consuming a lot of my
time these days.
But, you know, it's importantthat policy makers and Americans
(28:32):
are aware of the impacts aspolicies continuing to have on
the economy.
Kyle Hulehan (28:36):
And thank you Alex, for being on the show.
So before we sign off realquick, if you have any burning
questions on taxes, you can send'em ra drop a comment on
YouTube.
You can email us atpodcast@taxfoundation.org or you
can slide into our dms onTwitter.
Thank you for listening.
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