Last year Donald Trump, an Idiot, imposed tariffs on imported washing machines. The 50 percent tariff (it started at 20 percent, but was bumped up) was meant to punish foreign manufacturers and therefore boost domestic ones. A new study from the University of Chicago and the Federal Reserve found that the tariffs functioned in many of the pre-predicted ways: Foreign manufacturers raised their prices to offset the tariffs. Domestic manufacturers raised prices to match the new foreign prices, thus boosting their profit margins. It was American consumers who actually paid the tariffs, in the form of those higher prices; tariffs are essentially a form of sales tax.
But the researchers found something unexpected as well: The tariffs on washing machines also raised prices on dryers. In response to a 20 percent tariff on washing machines, manufacturers raised the prices of both washers and driers by about 12 percent each. It makes sense; washers and dryers are typically bought as a pair, and hiking the price of dryers to offset tariffs for washers, keeping the retail price of each in rough parity, may be less noticeable to consumers than a sharp rise in washing machines alone.
You'll note that 12 percent and 12 percent add up to more than the 20 percent tariff rate: Manufacturers took the opportunity to boost prices beyond what was necessary simply to recoup tariff costs.
So what's the bottom line? As job creation and protection device, Trump's global tariffs have been gaudily expensive. About 1,800 American jobs were created from foreign manufacturers increasing production here to avoid the new tariffs. But the additional costs to American consumers amounted to $1.5 billion—meaning the price paid for that small manufacturing shift was about $820,000 per created job.
Those created jobs may be fleeting, as well. The other intriguing finding of the new study is that manufacturing has been remarkably flexible; in response to previous tariffs imposed on specific nations, washer manufacturers simply moved shop to countries not subject to those tariffs, and it was only the new, global tariff that resulted in sharply increased consumer prices. This suggests that the 1,800 jobs created by the tariffs will vanish as soon as the tariffs are removed, as nomadic manufacturers once again pull up stakes in favor of whichever nation can offer them the cheapest materials and labor. To keep those jobs, American consumers will have to pay these new taxes going forward.