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Would Donald Trump’s taxes on trade hurt US consumers?

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Reuters Donald Trump at a campaign rally pointing to the right of the picture. The BBC Verify logo is in the top righthand corner.Reuters

Donald Trump has pledged to drastically increase tariffs on foreign goods entering the US if he is elected president again.

He has promised tariffs – a form of tax – of up to 20% on goods from other countries and 60% on all imports from China. He has even talked about a 200% tax on some imported cars.

Tariffs are a central part of Trump’s economic vision – he sees them as a way of growing the US economy, protecting jobs and raising tax revenue.

He has claimed on the campaign trail that these taxes are “not going to be a cost to you, it’s a cost to another country”.

This is almost universally regarded by economists as misleading.

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How do tariffs work?

In practical terms, a tariff is a domestic tax levied on goods as they enter the country, proportional to the value of the import.

So a car imported to the US with a value of $50,000 (£38,000) subject to a 10% tariff, would face a $5,000 charge.

The charge is physically paid by the domestic company that imports the goods, not the foreign company that exports them.

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So, in that sense, it is a straightforward tax paid by domestic US firms to the US government.

Over the course of 2023, the US imported around $3,100bn of goods, equivalent to around 11% of US GDP.

And tariffs imposed on those imports brought in $80bn in that year, around 2% of total US tax revenues.

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The question of where the final “economic” burden of tariffs falls, as opposed to the upfront bill, is more complicated.

If the US importing firm passes on the cost of the tariff to the person buying the product in the US in the form of higher retail prices, it would be the US consumer that bears the economic burden.

If the US importing firm absorbs the cost of the tariff itself and doesn’t pass it on, then that firm is said to bear the economic burden in the form of lower profits than it would otherwise have enjoyed.

Alternatively, it is possible that foreign exporters might have to lower their wholesale prices by the value of the tariff in order to retain their US customers.

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In that scenario, the exporting firm would bear the economic burden of the tariff in the form of lower profits.

All three scenarios are theoretically possible.

But economic studies of the impact of the new tariffs that Trump imposed in his first term of office between 2017 and 2020 suggest most of the economic burden was ultimately borne by US consumers.

A survey by the University of Chicago in September 2024 asked a group of respected economists whether they agreed with the statement that “imposing tariffs results in a substantial portion of the tariffs being borne by consumers of the country that enacts the tariffs, through price increases”. Only 2% disagreed.

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Raising prices

Let’s use a concrete example.

Trump imposed a 50% tariff on imports of washing machines in 2018.

Researchers estimate the value of washing machines jumped by around 12% as a direct consequence, equivalent to $86 per unit, and that US consumers paid around $1.5bn extra a year in total for these products.

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There is no reason to believe the results of even higher import tariffs from a future Trump administration would be any different in terms of where the economic burden would fall.

The non-partisan Peterson Institute for International Economics has estimated Trump’s new proposed tariffs would lower the incomes of Americans, with the impact ranging from around 4% for the poorest fifth to around 2% for the wealthiest fifth.

A typical household in the middle of the US income distribution, the think tank estimates, would lose around $1,700 each year.

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The left-of-centre think tank Centre for American Progress, using a different methodology, has an estimate of a $2,500 to $3,900 loss for a middle-income family.

Various researchers have also warned that another major round of tariffs from the US would risk another spike in domestic inflation.

Impact on jobs

Yet Trump has used another economic justification for his tariffs: that they protect and create US domestic jobs.

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“Under my plan, American workers will no longer be worried about losing your jobs to foreign nations, instead, foreign nations will be worried about losing their jobs to America,” he said on the campaign trail.

The political context for Trump’s tariffs was longstanding concern about the loss of US manufacturing jobs to countries with lower labour costs, particularly after the signing of the North American Free Trade Agreement (Nafta) with Mexico in 1994 and the entry of China into the World Trade Organisation in 2001.

In January 1994, when Nafta came into effect, the US had just under 17 million manufacturing jobs. By 2016, this had declined to around 12 million.

Yet economists say it is misleading to attribute this decline to trade, arguing that growing levels of automation are also an important factor.

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And researchers who studied the impact of Trump’s first-term tariffs found no substantial positive effects on overall employment in US industrial sectors that were protected.

Trump imposed 25% tariffs on imported steel in 2018 to protect US producers.

By 2020, total employment in the US steel sector was 80,000, still lower than the 84,000 it had been in 2018.

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Impact on trade deficit

Trump has criticised America’s trade deficit, which is the difference between the value of all the things the country imports and the value of its exports in a given year.

“Trade deficits hurt the economy very badly,” he has said.

In 2016, just before Trump took office, the total goods and services deficit was $480bn, around 2.5% of US GDP. By 2020, it had grown to $653bn, around 3% of GDP, despite his tariffs.

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Part of the explanation, according to economists, is that Trump’s tariffs increased the international relative value of the US dollar (by automatically reducing demand for foreign currencies in international trade) and that this made the products of US exporters less competitive globally.

Another factor behind this failure to close the trade deficit is the fact that tariffs, in a globalised economy with multinational companies, can sometimes be bypassed.

For example, the Trump administration imposed 30% tariffs on Chinese imported solar panels in 2018.

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The US Commerce Department presented evidence in 2023 that Chinese solar panel manufacturers had shifted their assembly operations to countries such as Malaysia, Thailand, Cambodia and Vietnam and then sent the finished products to the US from those countries, effectively evading the tariffs.

There are some economists who support Trump’s tariff plans as a way to boost US industry, such as Jeff Ferry of the Coalition for A Prosperous America, a domestic lobby group, but they are a small minority of the profession.

Oren Cass, the director of the conservative think tank American Compass, has argued tariffs can incentivise firms to keep more of their manufacturing operations in America, which he argues has national defence and supply chain security benefits.

And the Biden/Harris administration, while sharply criticising Trump’s proposed extension of tariffs, has kept in place many of the ones he implemented after 2018.

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It has also imposed new tariffs on imports of things like electric vehicles from China, justifying them on the grounds of national security, US industrial policy and unfair domestic subsidies from Beijing.

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Business

Obsession with pylons shows the UK has its wires crossed

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Two things will slow up the so-called great grid upgrade (FT View, October 9). The first is politicians and the press calling communities Nimbys. That just fuels the fire of opposition and the battle lines become entrenched. A more successful approach would be to engage communities in shaping their future.

The second is associating a grid upgrade with pylons and pylons alone. The pylons obsession of our leaders and their lackeys demonstrates their ignorance.

In the US there is a new requirement to upgrade the existing grid before building new, damaging and costly transmission infrastructure. In Germany, a choice was made to bury high voltage direct current cables instead of using overhead lines. Two reports in the UK have shown that this can be less costly than pylons. And across the North Sea, Belgium, Holland, Germany and Denmark are working at pace to co-ordinate their offshore grid, thus reducing infrastructure and cutting costs.

As for what’s happening here in the UK, our government continues to pursue the expensive, damaging and unpopular “radial” approach by which a connection is offered, wind farm by wind farm, to a substation. That substation may be some way inland instead of on the coast. The result is a spider’s web of wind farm cables criss-crossing the North Sea and the countryside, without any co-ordination.

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Being a dinosaur is the problem. It has nothing to do with Nimbys.

Rosie Pearson
Founder, Essex Suffolk Norfolk Pylons Action Group, Coggeshall, Essex, UK

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Google goes nuclear to power its artificial intelligence ambitions

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Google goes nuclear to power its artificial intelligence ambitions

Google has signed a deal to use small nuclear reactors to generate the vast amounts of energy needed to power its artificial intelligence (AI) data centres.

The company says the agreement with Kairos Power will see it start using the first reactor this decade and bring more online by 2035.

Technology firms are increasingly turning to nuclear sources of energy to supply the electricity used by huge data centres that drive AI.

The companies did not give any details about how much the deal is worth or where the plants will be built.

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“The grid needs new electricity sources to support AI technologies,” said Michael Terrell, senior director for energy and climate at Google.

“This agreement helps accelerate a new technology to meet energy needs cleanly and reliably, and unlock the full potential of AI for everyone.”

Last month, Microsoft reached a deal to restart operations at the Three Mile Island energy plant, the site of America’s worst nuclear accident in 1979.

In March, Amazon said it would buy a nuclear-powered data centre in the state of Pennsylvania.

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Nuclear power, which is virtually carbon free and provides electricity 24 hours a day, has become increasingly attractive to the tech industry as it attempts to cut emissions while becoming more energy intensive.

However, critics say nuclear power is not risk-free and produces long-lasting radioactive waste.

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Travel

Delta to launch Minneapolis-Copenhagen route

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Delta to launch Minneapolis-Copenhagen route

The thrice-weekly service will launch in May 2025, with codeshare opportunities at both ends thanks to an agreement with SAS

Continue reading Delta to launch Minneapolis-Copenhagen route at Business Traveller.

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Business

How to style a picture-perfect home

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How to style a picture-perfect home

By Kate Youde

Jan Baldwin approached her London home like a photographic project. “A project that we would live in,” says the retired interiors photographer, of her Grade II-listed house on Lloyd Square, Clerkenwell.

Baldwin, who has two photographs in the National Portrait Gallery’s collection, and whose work has featured in magazines including The World of Interiors, Elle Decoration and House & Garden, understands that rooms look better in pictures when they’re stripped back. “How a camera sees things is not always how your eyes see it,” she says, “so taking away a few pieces of furniture lets the space breathe”.

Making sure a room is tidy and adding flowers, in moderation, makes a space feel welcoming

Baldwin embraces the less is more approach for her own property (currently on the market for £3mn with Savills), and has several tips for fellow owners on how to style their homes for sale.

She and her husband, Henry Wynn, an emeritus professor of statistics at LSE, bought the three-storey house in the 1980s, when it was so rundown they couldn’t open the front door. “Both my husband and the architect were afraid of heights so it was me who went up the ladder and broke into the house through a first-floor window, and then came down and let them in,” says Baldwin.

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The couple lived in Baldwin’s then-studio in east London during the year-long renovations, which included replacing the roof and back extension, and restoring original features such as fireplaces and wooden floorboards. Baldwin had confidence in the “good bones” of the 1820s house, which has three bedrooms plus a lower ground floor study that could make a fourth. “I knew that once we sorted it out it would be beautiful,” she says.

Don’t be afraid to move furniture around to create more space — and never leave a fireplace empty!

Her faith paid off. The semi-detached villa, largely furnished with inherited pieces and characterful, second-hand finds, features in design writer Ros Byam Shaw’s book, Perfect English Townhouse, for which Baldwin provided photography.

It is a 20-minute walk from King’s Cross station, on the Lloyd Baker estate, which Baldwin had long admired for its village-like feel and Greek revival architecture. The house, which has a back garden and patio, faces the private garden at the centre of Lloyd Square — the setting for their son’s wedding.

Baldwin and Wynn are selling in order to make their second home — a more spacious eco-house on the East Sussex coast — their main base now they are retired. Baldwin has her dark room there.

She worked with the photographer who shot their London home for estate agent Savills, and recommends others putting their home on the market do the same. Being part of the process means you can see what you need to do, such as moving some of the furniture to make a room more spacious and elegant. “Don’t be afraid of straight-on shots because they give a room a bit of gravitas,” she says.

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Light streaming in through a window gives life to the photograph of any room

When shooting a room that has another room leading on from it, she recommends opening the door between them. Lighting is key: Baldwin aims to photograph a room when sunshine is streaming through a window — “it makes it feel more alive”.

Her other styling tips are all about attention to detail: plump and turn cushions so zips don’t show; straighten lampshades, curtains, blinds and (clean) towels; put logs in fireplaces to avoid “big black holes”; hide wires; polish bathroom fixtures; and have flowers in the home but don’t overdo colour — choose a palette that enhances a room’s hue, or stick to greenery. She’ll also try to “lose” the television in her photographs.

Finally, in the bedroom, Baldwin advises breaking up the space of a large bed with a throw, and using clean, ironed pillowcases. “We don’t like that slept-in look really, do we?” she says.

The Lloyd Square property is on sale for £3mn through Savills.

Photography: Savills; Jan Baldwin

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Final days for Americans to claim share of $115m privacy settlement – no bank statement is needed to get check

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Final days for Americans to claim share of $115m privacy settlement - no bank statement is needed to get check

THE deadline is looming for Americans to claim a chunk of a $115 million payout due to privacy concerns.

It comes after a class action lawsuit was filed against cloud applications provider Oracle America, Inc. in California in 2023.

Oracle has agreed to pay $115 million after a class action lawsuit was filed in California regarding privacy concerns (stock image)

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Oracle has agreed to pay $115 million after a class action lawsuit was filed in California regarding privacy concerns (stock image)Credit: Alamy
Eligible claimants can apply for a chunk of the money but there are only a few days left to do so (stock image)

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Eligible claimants can apply for a chunk of the money but there are only a few days left to do so (stock image)Credit: Getty

The complaint alleges that the company illegally collected personal information and sold it to third parties for advertising purposes.

“Oracle improperly captured, compiled, and sold individuals’ online
and offline data to third parties without obtaining their consent,” the class action notice claims.

Web activity, purchases made online, geolocation and other personal information were reportedly collected and sold by the company.

Oracle collaborates with the likes of Uber, AMC, and MGM Resorts.

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While agreeing to a $115 million settlement, Oracle admits no wrongdoing.

COMPENSATION

Under the terms of the agreement, claimants will receive an equal share of the settlement fund.

It is not currently known how much money each claimant will receive as the net settlement fund will be impacted by how many eligible claims are received.

As well as monetary compensation Oracle is also changing some of its operations in the wake of the lawsuit.

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The company will review its privacy systems and will no longer collect user information from forms and referrer websites on its own site.

Those who are eligible for payment will have had their personal information collected and/or sold since August 19, 2018.

Americans to get one-time payment up to $11,500 from $2.45 million data breach settlement – you just need to check post

Data that was sold may have been made available through ID Graph, Data Marketplace, or another advertising product used by Oracle since the above date.

However, those who believe they are eligible have just four days left to file a claim.

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To do so, eligible members are urged to visit the settlement website where they will be directed to a claim form submission portal.

KEY DATES

The final date to submit a form is October 17 with those wishing to object or exclude themselves from the settlement also asked to appeal by this date.

What is a class-action settlement?

CLASS action lawsuits offer groups of people, or ‘classes,’ a way to band together in court.

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These suits are often brought by one or a few people who allege a company or other entity has wronged a large group of people.

When a suit becomes a class action, it extends to all “class members,” or people who may have similar complaints to those who filed the suit.

Companies often settle class actions – offering payment to class members who typically waive their right to pursue further legal action by accepting money.

These payout agreements frequently include statements by the defendant denying wrongdoing. Companies tend to settle class actions to avoid the costs of further litigation.

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Pollution, discrimination, or false advertising are a few examples of what can land a class action on a company’s doorstep.

Those who exclude themselves from the settlement will not receive any money but will retain their right to sue Oracle in the future regarding the same complaint.

Meanwhile, eligible claimants who do nothing will not receive any money and will forfeit their legal rights.

A final approval hearing is scheduled for November 14.

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This is where a judge will review the settlement and its terms and decide how much money each claimant will receive after various deductions.

Meanwhile, thousands of Americans are eligible for part of a $29.5 million settlement involving Citibank.

Each claimant could get a payment of up to $850 if they were impacted by calls regarding credit card balances between August 15, 2014 and July 31, 2024.

However, the deadline is looming for Citibank customers to take action.

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Lilly Ledbetter, icon of equal pay in US, dies aged 86

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Lilly Ledbetter, icon of equal pay in US, dies aged 86

Lilly Ledbetter, whose name graces an equal pay law in the US, has died aged 86.

CBS, the BBC’s news partner in the US, quoted her children as saying she died peacefully on Saturday surrounded by family and loved ones.

“Our mother lived an extraordinary life,” added a family statement.

Ms Ledbetter’s activism led to the first bill signed into law by Barack Obama after he became US president in 2009.

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The Lilly Ledbetter Fair Pay Restoration Act made it easier for workers to sue after discovering they were being discriminated through pay.

Mr Obama said that the law sent the message “that there are no second-class citizens in our workplaces”.

President Biden, who was vice-president during the Obama administration, described Ms Ledbetter as a “fearless leader and advocate for equal pay”.

He paid tribute, saying “her fight began on the factory floor and reached the Supreme Court and Congress” and she “never stopped fighting for all Americans to be paid what they deserve”.

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“Before she was a household name, Lilly was like so many other women in the workforce: she worked hard, with dignity, only to find out she was being paid less than a man for the same work.”

Biden added it was “an honour to stand with Lilly as the bill that bears her name was made law”, describing the Fair Pay Restoration Act as a “critical step forward in the fight to close the gender and racial wage gaps”.

Ms Ledbetter worked as a supervisor for Goodyear, the tyre manufacturer, in Alabama for nearly 20 years before discovering she was being paid less than men doing the same job.

The Supreme Court ruled in 2007 that she had no grounds to sue because her complaint had not been lodged within six months of the discrimination first taking place. Her law overturned that ruling.

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The former president paid tribute on Twitter/X, saying Ms Ledbetter “never set out to be a trailblazer or a household name. She just wanted to be paid the same as a man for her hard work”.

“Lilly did what so many Americans before her have done: setting her sights high for herself and even higher for her children and grandchildren,” Mr Obama said.

Ms Ledbetter continued her advocacy after the law was signed.

She received the Future Is Female Lifetime Achievement Award from Advertising Week last week, according to the Alabama news site AL.com.

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A new film about her life, called Lilly and starring Patricia Clarkson, has recently been shown at the Hamptons International Film Festival.

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