Rolland E. Kidder

                                                    The Post-Journal

The Downside Uncertainty Of Tariffs

Aug 2, 2025

 

Rolland Kidder

The Trump administration’s levying of tariffs is a form of taxation, essentially a tax hidden from public view. They are imposed before the final sale of a product. In essence, tariffs are a pre-sales tax, levied at a port-of-entry on goods coming into the country. They are included in the price being paid by Americans for whatever the product is.

So, for example, let’s say a carpet made in Vietnam comes into the Port of New York for ultimate sale here. The cost of the carpet goes up 20% when the federal government slaps a tariff on it in New York, and then it comes here where an additional 8% sales tax is added.

We know that the 8% added here goes to state and local government. What happens to the 20% going to Washington? We don’t know, though some of it is likely going to help pay off our growing national debt.

Yet, more devasting than the cost of tariffs, is their negative impact because of the unpredictability they cause in the market place. The President seems to raise and lower them at a whim. It is hard to operate a company with a sound business plan when you are not sure how the tariffs are going to affect your business.

This past week, I drove past the Cummins Engine plant here and saw fewer cars in the parking lot than I usually see there. When inquiring with someone more familiar with their operations, it seems that Cummins engine orders are way down from where they were a year ago…so shortened work weeks, partial voluntary time reductions etc. are now underway at the plant.

You wouldn’t think such a slowdown possible as you still see a lot of trucks on the road. What seems to be happening is that instead of replacing engines as they get old…trucking companies are trying to stretch the life of old engines because they are uncertain as to what the economic effects will be of all of the tariffs being imposed.

Such uncertainty also directly affects an international company such as Cummins. They sell a lot of engines in Europe and Asia. If we impose tariffs on those countries, those countries will reciprocate by raising tariffs on our products. That means that our truck engines will become more expensive in those markets…thus, reducing sales.

In short, the world economy is like a very finely tuned watch–if one part of it changes, then there are rippling effects down the line. Tariffs create uncertainty, and uncertainty is not good for jobs and the economy.

It has been interesting to watch the leaders of various countries coming to pay obeisance to President Trump in the White House. They say good things because they don’t want to be crushed by him with U.S. tariffs.

But, the country that matters most–China, has not come groveling to the White House. Instead, the Secretary of the Treasury has been going to places like Geneva and Stockholm to meet with his counterparts from China about trying to strike a deal on tariffs. The Chinese have never liked the idea of “kowtowing”–a Chinese word describing bending the knee or bowing the head to a superior power. They are not going to kowtow to Donald Trump.

Most industries that we have in America today are affected one way or another by international trade. The economic uncertainty being caused by tariffs is having downside, negative effects.