Why the people most hurt by Trump's tariffs are the most supportive of him

Source: Qin Shuo’s circle of friends

“Tariff” is Trump’s favorite word. During his presidential campaign in October 2024, Trump was interviewed by Bloomberg Editor-in-Chief John Micklethwait at the Chicago Economic Club and said: “For me, the most beautiful word in the dictionary is ‘tariff’. This is my favorite word.”

Trump implemented trade protectionism in his first term, imposed tariffs on China and the European Union, and waged a trade war from mid-2018 until the outbreak of the new coronavirus. China was indeed deeply affected. It is estimated that Trump believes that this is the “credit” of his trade war, so he “continued to work hard” in his second term.

On January 20, 2025, the first day of his administration, Trump issued a presidential memorandum, which mentioned that US government agencies should use tariffs and other means to formulate appropriate measures to deal with the US trade deficit and other issues.

This is regarded as a revised wording of “across-the-board tariff”. Last year, during his presidential campaign, he advocated imposing tariffs of more than 10% on all imports into the United States. This indiscriminate tariff is called a "universal tariff."

A week later, on January 26, Trump announced a 25% tariff on all Colombian goods entering the United States in retaliation for Colombia's refusal to accept illegal immigrants deported by the United States. The next day, Colombia gave in and Trump immediately rescinded the tariffs.

A week later, on February 2, Trump formally signed an executive order to impose a 25% tariff on non-energy goods exported from Canada and Mexico to the United States, and an additional 10% tariff on China on top of the current tariffs, which will take effect on March 4. We were supposed to welcome the God of Wealth on the fifth day of the Chinese New Year, but we ended up welcoming the God of Plague.

The United States' largest single-day tariff action in history, targeting its top three trading partners and covering 42.9% of their imports, marks a comprehensive upgrade of Trump's 2.0 tariff weapon.

In terms of the political procedures for the imposition of tariffs, this time Trump has created another "first." He is the first president to invoke the International Emergency Economic Powers Act (IEEPA), which was enacted and implemented in 1977, to implement tariff policies. The Act grants the president the power to bypass Congress and implement trade policies by issuing executive orders.

The president can also invoke specific trade clauses (clauses 201, 232, 301, 122 and 338, etc.) to issue executive orders to implement trade policies, but this method must first conduct relevant investigations, which is time-consuming and laborious, and is not as simple and quick as invoking the International Emergency Economic Powers Act.

Trump invoked the Act many times during his first term to achieve his goals, so he issued Executive Order No. 10886 on his first day in office, declaring a national emergency at the southern border of the United States due to illegal immigration, illegal drugs and drug entry.

On February 1, he issued another executive order to expand the scope of the national emergency, and regarded the so-called failure of the Mexican, Canadian and Chinese governments to effectively control the export of illegal drugs such as fentanyl as an unusual and abnormal threat to the United States. The next day, an executive order was signed to impose tariffs on the above three countries in one go.

On February 3, Canada and Mexico made concessions to the United States on the border issue, and Trump agreed to suspend the imposition of tariffs on Canada and Mexico.

A week later, Trump announced a 25% tariff on all steel and aluminum imported into the United States, which will take effect on March 12. Canada and Mexico are the main sources of steel and aluminum imports to the United States. This time, Trump emphasized that there are "no exceptions and exemptions" to the relevant requirements.

On February 13, Trump announced the latest tariff decision: to impose "reciprocal tariffs" on other countries in the coming weeks or months, that is, the United States will collect the same tariffs as the other party collects from the United States. However, this policy is more troublesome to implement, and the tax rate needs to be calculated for each item.

According to statistics, this involves more than 5,000 commodities, 186 countries and regions, and requires about 930,000 calculations. It is simply impossible to calculate. So Trump changed the effective date from "immediately" as he said a few days ago to "in the near future".

On February 14, Trump said that tariffs would be imposed on imported cars as early as April 2 to protect the domestic auto industry. However, it is not clear whether this policy applies to all imported cars.

Trump has now found a shortcut to bypass the legislature and all other constraints and impose tariffs at will, focusing on being casual and willful. What policy goals does he want to achieve through these dazzling and terrifying tariff policies? Can these goals really be achieved?

There are two purposes: revenue in material terms and revenge in spiritual terms.

First, Trump wants to increase the fiscal revenue of the US government. It is obvious that tariffs are levied by the US federal government and belong to the fiscal revenue of the federal government. The question is, who pays the tariffs? It is a mystery whether Trump knows the answer to this question.

The general view is that he does not know. He sincerely believes that tariffs are paid by "foreigners" who export goods to the United States. He has expressed this view very affirmatively on many occasions, and expressed indignation that foreigners should not be allowed to take advantage of Americans. His feelings are sincere and do not seem to be fake.

This view can be correct in theory, in the long run, and in equilibrium. However, in practice, in the short term, and in the process of adjusting to equilibrium, it can be very wrong.

Foreign companies export goods to the United States, and American importers go to the U.S. customs to pay tariffs, so-called customs clearance, take out the goods, and sell them in the United States. It is American companies, not foreign companies, who pay the tariffs directly.

Of course, who will pay this fee in the end depends on the bargaining power of both parties. If the American company must purchase goods from this foreign company, then it can only pay this fee itself. If the American company has many options and does not have to purchase goods from this foreign company at all, and this foreign company has only this one customer, then the American company can completely ask this foreign company to pay this fee by reducing the price or in other ways. Most of the time, the situation falls at a point in the middle of the number axis formed by these two endpoints.

The current situation of American companies is closer to the former. For example, American companies that import goods from China are unlikely to find alternatives with better cost-effectiveness than Chinese goods in the short term. When shopping at Walmart supermarkets, the prices of anything made in China are touchingly low, while the prices of things made in the United States are painfully expensive.

A decent set of clothes produced in China is not as expensive as a few heads of Napa Cabbage produced in the United States. If you go to Publik supermarket (a bit higher-end than Walmart), cabbage is sold by weight, and a larger cabbage costs nearly $20. Of course, cabbage may not be a good reference. Americans don’t seem to like to eat cabbage, so they may grow less and it is particularly expensive.

However, the overall conclusion still holds true. Chinese products are cheap and good, so American companies are willing to import them. In the short term, it is difficult for American companies to import such cheap and good things from other countries. First, other countries may not have such hardworking and intelligent people who have such low requirements for wages, working conditions, and environmental protection; second, even if they do, it will take time for the supply chain to shift. So, in the short term, American companies that import goods from China must bear the cost of tariffs.

Will they pass this cost on to consumers? This also depends on the relative bargaining power of the two. On February 11, Walmart Chief Financial Officer John David Rainey said in an interview with CNBC that Walmart will have to significantly increase prices for goods affected by tariffs. Consumers have no bargaining power in front of retail giants.

So, in the end, through the transmission mechanism of bargaining power, American consumers will bear Trump's increased tariffs.

In other words, the fiscal revenue increased by the US government through tariffs actually comes from the pockets of ordinary Americans. It can be seen that if the bargaining power is strong, then the tariffs are paid by "foreigners"; if the bargaining power is weak, then the tariffs are paid by "our own people." The National Retail Association estimates that Trump's new tariffs will cost consumers an additional $46 billion to $78 billion. This is like imposing taxes on one's own citizens.

Sadly, this tax directly affects the livelihoods of low-income people. For the US federal government's annual fiscal revenue of 4 to 5 trillion US dollars, an increase of tens of billions is just a small amount, but for low-income people, this is the money for bread, eggs and milk powder. It is not very kind for the government to take money from their mouths.

However, the taxation in the United States has always been like this. The richer the person, the lower the tax rate. Rich people with conscience like Buffett can't stand it. They have repeatedly drawn the attention of the US government to this issue and asked the government to increase taxes on the rich, including himself.

In August 2011, Buffett even published a column in the New York Times, arguing that the current US laws are too "friendly" to billionaires and they should be taxed more. On September 19, 2011, US President Obama proposed to Congress to increase taxes on the rich to ensure that the income tax rate of the rich with an annual income of more than 1 million US dollars is not lower than that of the middle class.

Obama called this suggestion the "Buffett rule" or "Buffett tax". Later, people jokingly called it the "rich tax." The Democratic Party pushed for this "Fair Tax Act 2012" but failed.

The marginal tax rate paid by the average middle class in the United States is around 15% to 25%. For the richer middle class, most of their income may need to pay a marginal tax of 35%. However, the tax rate on investment income does not exceed 15%, which is much lower than the wage tax rate. This means that people who earn income from capital bear a much lower tax rate than those who earn income from labor.

Buffett himself gave an example, saying that his total tax bill in 2010 was $6.4 million, accounting for only 17.4% of his taxable income. However, the average tax rate paid by more than 20 employees in Buffett's office was as high as 36%, which is very unfair.

Bill Gates strongly supports Buffett and provides additional opinions, believing that the focus of increasing taxes on the rich should not be their income tax, but estate tax, capital tax and other taxes.

While suggesting the imposition of a "rich tax", Buffett also proposed specific ways to reduce taxes on the poor. Shortly after the outbreak of the epidemic in 2020, Buffett accepted an exclusive interview with Andy Serwer, editor-in-chief of Yahoo Finance, in Omaha. He suggested that the government exempt low- to middle-income working people (especially couples with children) from labor income tax, and that it should be a monthly credit rather than an annual credit. After all, bills are mostly paid monthly, not annually.

Trump and Buffett have completely opposite attitudes towards the "rich tax". Trump is very proud of his ability to cleverly exploit loopholes to avoid taxes. In the second debate of the presidential campaign in 2016, he even introduced his experience in tax avoidance. He said: "Recording an asset as an expense or loss can effectively reduce the value and income of the asset. A large part of the expense is depreciation." He also claimed that Buffett received a huge tax deduction.

The next day, Buffett issued a statement detailing his tax affairs: "My 2015 tax return shows that my adjusted gross income is $11,563,931, and the federal income tax paid that year is $1,845,557. Tax returns in previous years also reflect similar situations. I have paid federal income tax every year since I was 13 years old in 1944."

On July 1, 2021, the Trump Company and its chief financial officer Weisselberg were indicted by the Manhattan District Attorney's Office in New York for suspected financial fraud and tax crimes. In August 2022, Weisselberg formally pleaded guilty. As part of the plea agreement, Weisselberg became a tainted witness and identified the Trump Group. In December 2022, the New York State Supreme Court officially ruled that the Trump Group was guilty of 17 criminal charges including tax fraud.

Trump's attitude towards taxes has always been "tax cuts", but it is a tax cut for the rich. The ones who really want to cut taxes for the poor are the Democratic presidents (such as Biden) and the Democratic presidential candidates (such as Harris).

You might think that the poor would support the Democratic Party and its presidents and presidential candidates, but the opposite is true. It was mainly the poor who brought Trump into the White House again, just like last time.

Why is this?

This may be related to Trump's second purpose of imposing tariffs, which is revenge. He claims that imposing tariffs can force entrepreneurs to move factories back to the United States from abroad, provide jobs for the American people, and help the American people take back the jobs that were taken away by "foreigners".

However, after careful analysis, can Americans really do and are willing to do the so-called jobs taken away by "foreigners"? These jobs are basically hard, tiring, dirty work, and the pay is very low.

There used to be many textile mills in the United States. Buffett's companies Berkshire and Hathaway were two textile mills in the New England region in northern the United States that he acquired earlier. After more than 20 years of struggle, Buffett finally closed his textile business in 1985.

The textile industry first moved from the northern United States to the southern United States, and then moved to foreign countries. The United States also had many steel mills. During the Industrial Revolution, the United States' manufacturing industry was very developed, forming a "Manufacturing Belt" in the Great Lakes and its surrounding areas in the northeast, which is now the "Rust Belt".

If someone now proposes to bring the textile industry back to the United States, Americans will think that this person is mentally ill; but now Trump proposes to bring the steel industry back to the United States and revive the "Rust Belt", Americans think he is a savior.

The textile industry disappeared in the United States, and the steel industry basically disappeared, but the US economy did not stagnate. In fact, the US economy soared. In 2016, Buffett pointed out in a letter to shareholders that since he was born in 1930, the per capita GDP of the United States has increased nearly sixfold. "America is great now and will be great in the future," he said, referring directly to Trump's campaign slogan MAGA (Make America Great Again).

Eight years later, the US GDP has risen from $18.8 trillion in 2016 to $29.2 trillion in 2024, while the population has only increased slightly. Stock market indexes have hit record highs. In 1930, the year Buffett was born, the Dow Jones Industrial Average (Dow) was 250 points. On December 31, 2016, it was 19,762 points; on December 31, 2020, it was 30,606 points; on December 31, 2024, it was 42,544 points. From the numbers, whether America is great or not has little to do with who is president.

Although the US "manufacturing belt" has become a "rust belt", Silicon Valley has emerged, the computer industry has flourished, then the Internet, now artificial intelligence, and then humanoid robots. It can be seen that as long as the system can stimulate people's creativity, there will be waves of innovation that are higher than the last wave and continue to promote economic development. Why do we have to bring back low-end manufacturing? Having already climbed to the top of the food chain, why do we have to climb down and compete with prey for food?

Of course, this is the truth from the overall and long-term perspective of the US economy. But what should be done about those people in the "Rust Belt" who are being eliminated by the times?

Buffett believes: "The government should let them find a sense of belonging in the market system, and let them get a larger share as the American economic goose continues to lay golden eggs." He compared the United States to a wealthy family with many children. He said: "If you have six or seven children and a family business that can be inherited, you will definitely choose the most capable child to inherit the family business, because the market system requires this, but at the same time, you must ensure that all seven children can participate in sharing the family wealth."

In other words, the US government should provide sufficient welfare, medical care, and education for those less capable people so that they can live a decent life, and ensure that their offspring have similar educational opportunities as the offspring of the rich, so as to obtain good job opportunities and improve their social status.

For the disadvantaged, ensuring equal opportunities and social mobility is the most responsible and effective help a government can provide to them.

What's the point of trying to snatch outdated jobs back from foreigners? Even if they are snatched back, they are unwilling and unable to do it, and their children are even more unwilling and unable to do it. It is even more wrong to start a full-scale trade war, because these people will be the ones who get hurt in the end.

This makes people wonder who Trump is doing this for? If he really cares about the poor, why does he raise tariffs? Of course, as mentioned in the preface, he may sincerely believe that tariffs are paid by foreigners.

But why is he unwilling to raise the minimum hourly wage? Harris promised during the campaign that if elected president, he would raise the minimum hourly wage from the current $7.5 to at least $15. But Trump was unwilling to make a promise, even if he was repeatedly questioned.

Ironically, it is these poor people who most support Trump's trade war. Why? Fighting a trade war, raising tariffs, and taking jobs back from foreigners, such a narrative is particularly touching because it contains many of the most primitive, instinctive, and strongest emotional components such as fear, hatred, revenge, and victory, so the emotional value is full.

In addition to revenue and revenge, Trump's third purpose of imposing tariffs is to use tariffs as bargaining chips to gain the initiative in negotiations on immigration, drug problems, and even territorial issues.

While waving the whip of imposing tariffs, he renamed the "Gulf of Mexico" to the "American Gulf", threatened to seize Greenland by force, claimed to own and take over Gaza, and even bypassed Ukraine to negotiate a ceasefire agreement between Russia and Ukraine with Putin, which was jaw-dropping.

However, Trump fans in the Rust Belt cheered and rejoiced. After years of loss, they finally found the feeling of being great again and became "Viagra" again. Although this feeling cannot bring them more income or a better life, in fact, they may not be able to afford even Chinese-made products soon, but they feel super good.

Trump has long mastered the traffic code of how to gain the support of these people. He does not need to provide bread, but only spiritual opium. "Trump feeds the people spiritual opium" is not the author's original words, but a quote from Vice President Vance.

Of course, this is what Vance used to insult Trump before he joined him. He said Trump is Hitler, a drug dealer who sells false hope and spiritual opium.

However, history has proven time and again that drug dealers who exploit the fragility and evil of human nature without hesitation and guilt are the most popular. Churchill said: "Talk to an ordinary voter for five minutes and you will find the best reason to oppose the democratic system."