Tariffs are Taxes. Retailers Turn Against Trump's Plan.

Time to prepare for inflation

Walmart, the world's largest retailer, fired the first warning shot against the incoming Trump administration's plans to impose tariffs on imports.

Walmart CFO John David Rainey hinted in an interview with Yahoo Finance’s Brian Sozzi on Tuesday that Trump’s tariff promises would prompt the retailer to hike costs, pointing to the impact of higher tariffs enacted during the president-elect's first term under his “America First” agenda. “If we look back historically when tariffs were enacted seven years ago, it did result in higher prices for customers,” Rainey said.

On the campaign trail, Donald Trump promised that he would increase tariffs on imports by 10% to 20%, with special attention given to China, raising them by up to 60%. Since China is now the GOP's primary overseas target, they feel an urge to engage in a confrontation with it.

If all imports are so harmful to the country, then how did Biden increase the GDP by $8 trillion and add 15 million jobs? I know the MAGA crowd tends to blame it all on COVID-19, but if that’s the case, then how did the deficit decrease by more than $1 trillion under Biden? Europe hasn’t fully recovered yet, the UK hasn’t fully recovered yet, and China is second behind the United States, adding $4 trillion to its GDP during the same period.

The United States expanded at a furious pace despite imports and despite MAGAs Covid politics burying American lives.

Trump knows this, but he can’t say it. He needs an imaginary threat to paint the picture that Biden was wrong and convince MAGA supporters that a strong economy is actually a bad thing. At its core, MAGA is driven by hate, and they need an imaginary enemy to stay negative about. Anything related to outsiders becomes an easy target for that hatred.

MAGA nativism is not protectionism; it is hate. Plain and simple.

So, Trump faces a dilemma. He needs tariffs because that’s the only way to keep reminding his MAGA followers that Democrats care about the outside world, while he supposedly cares only about them. It’s all for show, and the ideology behind MAGA hurts the very people who vote for Trump in large numbers. Don’t bother trying to convince them because once someone is "MAGA-marinated," it's very difficult to change their mind. Outright lying has become normalized. Tell them Biden reduced the deficit, and they’ll call the data fake. That’s how deep the brainwashing goes. Eight years is a long time to wash out the reasoning part of the brain.

Tariffs are taxes

Consumer prices will increase as tariffs lengthen the supply chain. You can’t simply slap a 20% tariff on a single product, regardless of which country it is imported from. If you do that and tell 192 nations around the world that their products will carry a 10% tax on entry, you can kiss the dollar goodbye. The world will experience a shock, but it will adjust. The dollar will decline, and China will say, "Thank you," becoming the growth driver for the next century. Europe will take over capital market duties, while China handles manufacturing for the world.

The Trump administration will not dare to impose tariffs on all countries. They will be selective. This means that instead of importing directly from China, products will first go from China to Vietnam or another country before making their way to the United States. Someone will pay for the extra shipping costs, and that someone will be the average consumer in the United States.

Rising prices have another name: inflation.

Walmart does not care where a product comes from. They will look at the quality and price of the shipment. If the price goes up, they won’t absorb the cost just because Trump is offering tax breaks to their owners. They are not going to let their earnings suffer and watch their market capitalization drop. They will pass the price increase on to the customers.

If domestic manufacturing is truly Trump’s real concern and he genuinely intends to help U.S. workers find more jobs, then he needs to take federal taxpayer dollars and invest them in the country. He should call his party and say, “Let’s make Biden look like a novice. He did a $1.2 trillion infrastructure bill; let’s do a $3.6 trillion infrastructure investment. Give me the list of industries you think will be key for the future. Let’s build it in a way that the country keeps talking about me for the next 100 years."

The products coming out of these industries will need time to reach scale. You need scale to become cost-competitive. Trump can use that time to impose tariffs on products from other countries, making domestic purchases cost comparable to imports. As the industry scales, the tariffs can be gradually reduced. This would still be a trade war, but it could work to the U.S. advantage in the long term. The rest of the world won’t be upset because this would be targeted at specific sectors, and you could likely get away with it.

However, going in this direction will take time and require a lot of hard work. It will transcend presidencies, meaning you have to work with the other side. But how is Trump’s MAGA movement going to do that when they spend every day turning anyone not in their camp into an "enemy of the state"?

You can’t. This means you’re left with actions that lack substance, driven by three simple questions:

1. Will I get enough media coverage?

2. Will there be someone to hate?

3. Will there be a person to fight with?

I’d be willing to tolerate this nonsense if it didn’t affect people, but it always ends up filtering down to all parts of society. The COVID "horror show" that MAGA politics created is the reason the United States lost hundreds of thousands of American lives.

The Biden economy is structurally strong. It’s not an easy one to break. You really need a next-level kind of stupidity to bring it down to earth. I am fully confident that Trump’s cabinet picks are fully qualified to deliver just that.

He is filling the pool with yes men.

What else is going to happen?