David Herbert of the American Institute for Economic Research critiques President McKinley Trump's infatuation with tariffs by offering a short primer on how they work that anyone but Trump himself will probably understand.

My annoyance with Trump aside, there are points any layman will appreciate being made clear, which is why I recommend the article. For example, just about anyone who gives a moment's thought to tariffs will realize they are indeed sales taxes, but one will not necessarily see the devil in the details of the incidences of the tax, economic and legal:

Image by W. Carter, via Wikimedia Commons, license.

...It could also be the case that the incidence of the tax is only 25 cents for consumers and 75 cents for seller, in which case the consumer would pay $2.25 and the seller would keep $1.25 per candy bar sold. Again, the difference between the price paid by consumers and the price received by sellers is always going to be the amount of the tax: one dollar.

The above represents the economic incidence of a tax. But there is also what we call the legal incidence of a tax. The legal incidence of a tax refers to whom must actually send the tax money to the government. With candy bars, we typically assign the legal incidence to the gas station, i.e. the seller...

... The only difference between a tariff and a traditional sales tax is the location of the seller. A sales tax is imposed on a seller within the US, and a tariff imposed on a seller located outside the US...

The piece then continues with a straightforward real-world example of how an Obama-era tariff worked. (Good thing we elected a Republican!)

I hear that Trump plans to slam our wallets via 25% tariffs on goods bought from sellers in Canada and Mexico come February 1.

Keep this five-minute red pill in mind for the time between when our prices start going haywire and the conspiracy theory machine starts churning.

-- CAV