President Donald Trump has finally belatedly realized that all of his tariffs on other countries are actually paid by Americans.

Food producers around the world, including beef producers here in Australia, are celebrating the good news that tariffs on their products are being slashed or dropped entirely into the US as Trump gets bitten by the reality that his tariffs are not a tax on the other country. They’re a tax on Americans. And credit where it’s due, Australia’s trade minister, Don Farrell, is spot on when he welcomed this announcement by saying, “Tariffs are an act of economic self harm and ultimately hurt American consumers. We maintain our position that tariffs on any Australian products are unjustified and continue to advocate for their removal.” He’s absolutely right to say that tariffs are an act of economic self harm. And I’ll explain exactly why that is and how that works later in this video.

But it’s no surprise to anyone who understands economics that the cost of living in the US, including the cost of food has risen sharply as Donald Trump’s tariffs have taken effect. This is something I’ve spoken about extensively here at the Topher project. And whilst I’m quite a fan of a lot of what Trump has done, this tariff nonsense has always been just that, nonsense. Because taxes in the end are always paid by people, not by countries or by businesses. And the people that pay are always the people in the country that levies the tax, not the people in a foreign country whose goods are being taxed.

But before we get to the details to understand why this is and why it matters, my name’s Topher Field. This is the Topher project and I help busy people like you to cut through the crap and not only to know what’s going on in the world, but to understand it. I’m 100% viewer supported. So if you appreciate what I’m doing here at the Topher project, then please help me to keep going by buying me a coffee via the button at topherfield.net. And if you like my videos, then you will love my books about government, power, the perverse incentives of politics, and why good people so often go bad once they’re elected, but also about human rights and civil disobedience. You’ll find both of my books, plus my DVD documentary, Battleground Melbourne. But perhaps most importantly, you’ll find my t-shirts and hoodies, including five designs that are about to be discontinued. So, if you want one, you need to get it before the end of November.

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Okay, we’re talking about tax and the fact that every single tax, including Trump’s tariffs on foreign countries, are in the end paid by human beings within the market that imposes the taxes.

And there are no exceptions to this rule. It’s also important to note that most of the tax burden falls specifically onto consumers. Those are the people at the very bottom of the supply chain. You want to tax the rich? Cool story. They have plenty of ways to minimize their taxes and pass the costs on. So, consumers will end up paying even for the taxes on the rich. You want to tax corporations? Well, consumers will pay in the form of higher prices or shareholders will pay. And we’ll get more to more on that in a minute. You want to tax imports? Well, then consumers will pay. Again, this is a universal law as absolute as gravity is. Taxes always fall on people and almost always fall on the consumer.

But people are fooled or in some cases they fool themselves into thinking that someone else can be taxed and not them. The trick is that at every point in the supply chain, everyone other than the consumer at the bottom has the ability and indeed the necessity to recover their tax costs by increasing their prices or reducing their value offering their product or their service. And in the end, it is always and only consumers who pay the vast majority of taxes. And Trump’s tariff nonsense illustrates this point perfectly. He sold it as making foreign countries pay to get access to the US market. But actually, it just makes the US consumer pay more for that foreign product, which is not the same thing. But thankfully after a sharp rise in the cost of living in the US, some semblance of sanity has reimposed itself with President Trump cutting some tariffs on some US imports, particularly food items. And whilst that’s great and a great start, the fact is most of the US tariffs remain and it is the US consumer who is paying.

So, this is a great opportunity to talk about taxes and this very important reality that no matter what a politician says, it is pretty much always consumers who pay. It’s just not possible for a government to impose a tax on anyone other than their own consumers at home, no matter how hard they try. That’s just not how it works, no matter how much they dress it up. And this matters because once you understand this fact, then you will become immune to every politician’s promise to tax them to help you. For example, Trump has been saying that he’s going to give US taxpayers a $2,000 dividend from the tariffs. And you’re supposed to believe that that’s foreign money that has been brought into the US and is now being given to US citizens. But the simple fact is whether you like it or not, that money came from US consumers in the first place, it’s just another example of the government churning money to buy popularity, buying votes and support with people’s own money.

The fact that most taxes are paid by consumers is obvious. The GST is literally a consumption tax.

Income tax applies directly to workers who are our consumers. Fuel excise, etc. These are all obviously taxes on consumption and on individuals and people. But some taxes are less obvious. We’ll come back to import tariffs in a minute. But let’s run through a few other kinds of tax. The payroll tax. This is where companies are taxed for the sin of employing people. It looks like a tax on business cuz it’s calculated based on a business’s metric, the size of their payroll. And because the money comes out of a business bank account, not a personal one. But where does the business get all of its money from?

Well, from its customers. Every time you drive up the cost of doing business with taxes or red tape or green tape or the cost of energy, you’re just driving up prices or you’re reducing profitability. And we need to talk about profits for a moment because politicians love to demonize businesses for the sin of making a profit. They try to conjure up an image of fat cats with cigars swimming in silos filled with cash. But the truth is that most businesses are small to medium businesses owned by families or individuals and most of the big businesses that they love to demonize. Well, most of them are publicly listed, which means they’re owned by moms and dads through superannuation. Big profitable companies that are owned only by rich fat cats. Well, they are very rare. And if they’re profitable, well, it means they’re doing something right and they shouldn’t be punished for doing that.

But the fact is that the image these politicians rely on, it’s a lie. The truth is that when the government taxes businesses, they’re taxing either the people who buy from the business or the people who share in the profits of the business, meaning the superannuation accounts of every Australian. And that’s true whether it’s payroll tax or corporate profits tax or any other tax at all. Royalties on mining, excise on fuel used in business and transport, stamp duty on all their insurances, or any other tax. Sure, they’re paid from a business’s bank account, but that money has to come from the consumer through higher prices or from the shareholder through lower profits and lower share prices. Taxes are always paid by people.

So, with that in mind, let’s come back to tariffs because all over the world, we see politicians saying that they’re going to put a tariff on some other country. They’re going to punish them or hurt them or gain some sort of advantage over them by taxing imports from that other country. But in reality, that’s just not how it works at all. If tariffs are high enough, it can actually create a downward economic spiral for your own country. Let me explain.

If the product that you make in your own country, if those products are already the cheapest or best in the world, then you don’t need to tax imports cuz there won’t be any. You don’t need tariffs cuz everyone’s going to buy internally what you produce because it’s already the cheapest and the best. And in that scenario, your exports are going to boom as well because consumers in other countries will want the cheapest and the best which is yours. So, if you as a country are importing a lot of something, it’s either because you don’t produce it in your own country, say if you don’t have local deposits of certain minerals or for some other reason your country isn’t able to produce that thing. If that’s the case, well, there’s no point imposing a tariff because you don’t have local production in any case. So, all you’d be doing is making life more expensive for your own consumers.

Or if you are importing something that you could produce in your own country, but the imports are either cheaper or better, then what that means is that what you produce either isn’t the best or it isn’t the cheapest. And that’s why imports are happening in the first place. people buy an imported product because in their opinion they’re better off with the imported product than they would be with a locally produced product instead. Now, if that’s happening, let’s say in the case of cheap clothing or cheap electronics from China, well, we can respond in one of two ways.

We could try and make Australia or in the case of Trump’s tariffs, the USA more competitive

by fixing whatever it is that’s making our industries nonviable in our own domestic markets. And we’ll go into detail on that in a minute. But the other option is to impose tariffs on the imports, making them more expensive so that our domestic producers can compete more easily. And if that’s as deeply as you look into it, then yeah, tariffs look like a great idea. If we tax the imports, people will buy more of the local product. And yeah, that can be true. But it’s true because the imported thing has been made more expensive. The thing that people would have bought because it was the best option for them is now only as good as the second best option, so they buy the second best option instead. Tariffs work by increasing the cost of living in your own country, not by increasing the costs to the country that you’re importing from. The taxes may be paid on the imported goods, but those taxes are being paid by your own people.

But where it gets really perverse is when you look deeper into the second and third order effects. In other words, how people change their behavior in response to the tariffs and then how people change their behavior in response to how people change their behavior in response to the tariffs. If I’m a producer in Australia and I’m having a hard time competing with imports because domestically my cost of energy, my cost of employing people of environmental approvals and everything else is so high in Australia that I just can’t compete. Well, in that scenario, there’s no chance of me having an export market to the world. I’m at too much of a disadvantage. So, all I have left is my own domestic market.

This is what happened with our car manufacturing industry. By the way, the cost of manufacturing in Australia was and still is so insanely high that very few Australian cars got exported. Some did go to the Middle East and a handful went elsewhere, but very few in the global scheme of things because our car manufacturing industry simply wasn’t competitive on the global market. The government instead of reducing the cost of doing business instead protected the domestic market by introducing the luxury car tax and a bunch of industry subsidies and bailouts to prop up our domestic car manufacturers here in Australia. But that doesn’t fix the problem which is the cost of energy, the cost of employment, the cost of doing business in Australia. That’s the problem. The result? Well, we have no car industry in Australia anymore. and the luxury car tax remains in place. So, now we’re paying a tax designed to protect an industry that we don’t even have anymore.

But what happens when an industry is protected is that it loses any incentive to become competitive to find an edge to innovate or to keep up with the global marketplace. In other words, the local industry might survive thanks to the protection against competition, but the local industry falls even further behind the rest of the world. So now, not only are local consumers paying higher prices thanks to the tariffs on imports, now they’re also stuck with an inferior local product made by businesses whose incentive is to beg the government for more handouts and more protection rather than to actually get better at doing what it is that they do. And that means that whatever exports there may once have been, well, they will soon evaporate and this spiral will deepen with producers now surviving only on their domestic market with no hope of any exports. And they will spend their time and energy lobbying the government for ever more bailouts and ever higher tariffs. Once you start protecting local industries from global competition, it’s very hard to stop or even to wind back.

Which is why I think Trump rolling back some of his tariffs is such great news.

Maybe, just maybe, he’s starting to realize the mistake he’s made. Maybe. So, instead of tariffs to protect local industry leading to higher cost of living, lower product quality, and destroying whatever chance we may once have had of exporting our products to the world, we should go the other way and ask ourselves, why are our local products uncompetitive in the first place? If we’re importing things, there’s a reason. And yes, in some industries, that reason is endemic. It’s inherent. It’s just not a viable industry locally. And so in some cases we have to import no matter what. But for most industries that’s not the case. For most industries in Australia and in the US, they’ve been made to be globally uncompetitive by the government.

In Australia, it’s the combined effect of the cost of energy, the cost of employment, not just wages, but I mean all of the red tape, the restrictions, the HR, the legislation, the cost of green tape, regulatory compliance, over-the-top safety, and all kinds of other standards. Not to mention the cost of real estate, meaning that even a modest factory in Australia costs a fortune to buy or rent. And of course, in Victoria, we now see new taxes on real estate going through the roof as well. The combined cost of all of that is the reason why Australian businesses find it hard, in some cases impossible, to compete globally. Tariffs are the government’s way of putting a band-aid on an arterial bleed that the government caused in the first place. If we’re uncompetitive, and we are, let’s be honest, the solution is not tariffs and protection of what’s left of our local production. The solution is to fix the problem at its source. To fix whatever it is that caused us to become uncompetitive in the first place, which means first and foremost fixing and reducing the cost of government.

I consider Trump’s tariffs to be one of his biggest mistakes as president. Yes, he’s used them as leverage in other negotiations, which I’ve covered in past videos. Trump’s tariff diplomacy, as I’ve called it. But whilst that’s nice for him to get extra leverage over other countries, the bottom line is that the bill is being paid by his own people, not the other country. And that can be seen in the increased cost of living in the US over the last year and by the fact that Trump is now selectively rolling back a handful of these tariffs to try and undo at least some of his mistake. And look, I get it. Free trade gets a bad rap. Lots of people think that free trade is the cause of all our problems. It’s led to Australia losing all of our manufacturing industry and brought us to the point where we make very little here in Australia. But that’s not the result of free trade. That’s the result of the sky cost of doing business in Australia, which has made us uncompetitive on the global stage.

The bottom line, all taxes, including import tariffs, are paid in the end by people and specifically paid by the people in the country that imposes the tax.

Tariffs may be popular, but they are economic self harm. And worse, they provide cover for the government to not fix the actual problem that they created in the first place. The obscene cost of energy, employment, and doing business in Australia. I can only hope that this unexpected but welcome move by Trump to reduce tariffs on some food items will soon be followed up by more cuts to tariffs and that the conversation sparked by Trump’s reversal and hopefully helped by this video will lead to more people recognizing the value of free trade and demanding that the government instead fix the actual problem fix the real reason why government has lost why Australia excuse me has lost its manufacturing place which is the cost of government.

My name’s Topher Fields. This is the Topher Project. I help busy people like you to cut through the crap and make sense of the nonsense that surrounds us. I’m 100% viewer supported. So, if you appreciate having an Australian voice of reason in a world gone mad, then please support my work by buying me a coffee via the button at topherfield.net. And if you like my videos, then you will love my books about government, power, human rights, and civil disobedience, which you’ll find along with my DVDs and my merch at goodpeoplebreakbadlaws.com. And remember, 5 of my t-shirt designs are being discontinued at the end of November. So, head over to goodpeoplebreakbadlaws.com now and grab yours before stock runs out.

Thank you for watching to the end. The algorithm loves you and so do I. Please like this video. Leave a comment on your thoughts about taxes, tariffs, and what it’s going to take to bring manufacturing back to Australia. Check out this video that YouTube thinks that you will like as well.

And as always, think free.