With the election over, there are a lot of remaining questions about what changes will be made to the United States in the next four years. And at the center of those questions lies what President-Elect Donald Trump will do with the economy, especially regarding his proposed tariffs.
Tariffs are a tax on an imported good or service and raise prices of items purchased from foreign producers. They are able to improve the economy when implemented well but also often lead to prices increasing for consumers, said Joseph Von Nessen, a research economist at the Darla Moore School of Business.
Tariff increases could have large effects on the country as a whole, but it could disproportionally affect the economy in South Carolina, said Sjoerd Beugelsdijk, a USC international business and economics professor.
South Carolina is a multinational focused economy. This means that many foreign multinational companies, such as BMW, have factories in South Carolina, and a lot of South Carolina based companies do business abroad, Beugelsdijk said.
Over the past 30 years, South Carolina's economy has transformed to become a multinational focused economy more than many other states, said Marc van Essen, the associate dean of International Programs and Partnerships at the Darla Moore School of Business.
“The state of South Carolina benefits because of this significant need for more globalization, the more interaction we have with other countries and other companies around the world,” van Essen said.
Trump has proposed a variety of possible tariffs ranging from 10% to 100% on goods from certain countries, according to Forbes.
Tariffs can either be general or specific and both can affect goods being imported. General tariffs, also called blanket tariffs, apply to all products from one country while specific tariffs apply to all goods.
“It really depends on the nature of the tariff, both whether it's broad based or very targeted, either industry wise or geography wise, and we have to know those details before we can assess the specific impacts,” Von Nessen said.
Trump has proposed general tariffs on countries such as China, Mexico and Canada that will affect all goods being imported from those nations, according to CNN.
The idea with these tariffs is to bring production back to the U.S, but there are other issues with the possibility and likely hood of this, Beugelsdijk said.
These issues include is if companies are able to produce the same quality domestically as they import as well has how long it will take to establish production domestically, Beugelsdijk said.
Tariffs can have positive and negative impacts on the economy depending on whether they are general or specific. The outcome on the economy depends on the intended target of the tariffs.
General tariffs lead to prices of all goods increasing, causing more inflation and are more likely to negatively impact the economy. Tariffs on specific goods are more likely to enhance the economy and encourage more domestic production of goods, Von Nessen said.
"Who's going to be helped when the prices of imports rise, and who's going to be harmed? It can cut both ways in the U.S. and in South Carolina, specifically, depending on who the tariffs are targeted to help,” Von Nessen said.
Tariffs also have a larger affect on consumers than big corporations or international suppliers. Tariffs can lead to companies needing to increase prices of goods, causing consumers to have to pay more and taking the brunt of the cost increase.
“Who’s going to pay for these tariffs? If the price of all goods that are being imported go up, then it’s you and me paying for it,” Beugelsdijk said.
Tariffs applied to specific nations means that companies importing goods from those nations need to pay the price increase of the tariff.
When tariffs are low, companies can withstand the cost and keep prices down, but when tariffs are large, companies may have to increase prices that consumers pay, Beugesdijk said.
“But if you’re talking about 60% (tariffs) there’s no way that firms can do that. So then it will have an effect on the prices, and that will lead to inflation of products,” Beugelsdijk said.
It is still unclear what tariffs will actually be implemented. Right now, all that can be done is speculate and prepare for the possible outcomes, Von Nessen said.
“The Trump administration is looking to … implement tariffs on certain goods, and implement tariffs on goods from certain countries. But beyond that, we really don't know any specifics, and until we do it, we can't estimate what the specific impacts are likely to be,” Von Nessen said.
While there is uncertainty around what tariffs will actually mean, ports and business in South Carolina have started to prepare for the effect they have have on the economy, according to the South Carolina Small Business Chamber of Commerce.