US Inflation Rises in June

“ They don’t export manufactured products to us. As I pointed out.”.

Raw materials can be manufactured goods or farm products processed in some way. There are also factories in third world countries that process raw materials shipped to the US for final assembly. An example would be lumber cut from trees and milled into boards in a third world country like Honduras and then shipped to a US factory for final processing into decking or furniture.

US farmers grow crops also grown in poor countries. Should the US farmer pay US taxes on his US sales of products while the farmer in a developing country can ship his competing products into the US market and pay no taxes? The American farmer is disadvantaged in that situation. The same for the American miner or American producer of lumber. The American producer pays taxes and fees to build and maintain the infrastructure that allows the US to have a large market. The foreign competitor who pays no taxes, duties or tariffs to gain access to the US market gets a free ride and a cost advantage competing against Americans in our home market.

Why shouldn’t the Brazilian orange grower pay for access to the US market if the Florida or California grower is paying US federal and state taxes? The same for the Chilean copper mine versus the Arizona copper mine. Fair trade is equal rules of engagement. When the US supplier is taxed by the US government and the foreign supplier is not taxed by the US government for selling the same product in the US market, fair trade does not exist. Ultimately the US farmer or miner will lose.

As for Trump’s tariffs, so far the early economic data does not show them being passed along to the US consumer in the form of higher prices. It appears the foreign suppliers are absorbing the cost of tariffs. Time will tell if this cost absorption continues but so far those economists insisting tariffs will result in higher prices at home have been wrong.

“I don’t what you’re referring to when you say US farmers pay taxes and fees.”

Farmers generate income by selling the crops they grow. If they make a profit on those sales the law requires they pay federal and state taxes on the income. In addition they pay property taxes on the land they grow crops on. In some states they pay property taxes on farm equipment and buildings. The gasoline and diesel fuel they consume in their farm equipment is taxed and those taxes are passed along to them in the price of fuel. Fuel taxes pay for the roads systems used to transport farm products from farm to market. Foreign farmers pay nothing toward the building and maintenance of the roads that carry their products from US ports to market. In fact the American taxpayer pays for those ports as well as the dredging and maintenance of waterways used by ships bringing foreign agricultural products and manufactured goods to the U.S. market.

Many farmers participate in the federal crop insurance program. In addition to insurance premiums, there are fees for participation. The farming practices of farmers participating in the federal crop insurance program are more heavily regulated by the USDA than other farmers.

The Agriculture Marketing Service of the USDA assesses farmers fees for voluntary grading, inspection, certification, auditing and laboratory services for a variety of agricultural commodities including meat and poultry, fruits and vegetables, eggs, dairy products, and cotton and tobacco.

Complying with EPA regulations is a significant cost to farm operations. The EPA regulates land use, storm water runoff, pesticide and chemical use, air emissions, waste disposal, storage facilities on farms, water quality, and other farming activities. Permits must be secured for some activities.

Compliance with federal and state government regulations is a significant cost American farmers bear that foreign farmers exporting to the U.S. do not bear.

It is illogical to consider income taxes as a cost to be equalized by tariffs. Income taxes are calculated on what’s left over after paying all expenses. It is not a cost of producing the crop. Overseas farmers must pay some income tax too (your story implies they don’t pay any) but whether the overseas farmers have a higher or lower income tax rate than US farmers has zero impact on US farmers.

The overseas farmer sells their crop at the market price. Period. If their income tax rate goes up or down their selling price remains the same. It impacts them but has zero impact on the US farmer.

Second, whoever imports the crops from overseas would sell them to a food distributor in the US, just as the US farmer does. If the importer makes a profit on the sale, then they would pay taxes, wouldn’t they?

Third, the US government gives various subsidies to farmers, which you leave out of the story. So you would have to compare the subsidies US farmers receive to what overseas farmers get, which is undoubtedly different in every country.

Fourth, we don’t know what costs the foreign governments impose in the countries we imported the crops from. Your analysis assumes they have no such costs there. It must be different in every country. But you absurdly imply there are zero government costs in every other country in the world. Really?

Finally, if US farmers have higher government imposed costs (after subtracting out subsidies) tariffs are a stupid “solution” to that problem.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.