Auto Tariffs: A “Double-Edged Sword” for the Economy

Intermediate | May 27, 2025

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What Are These Tariffs All About?

Tariffs Raise Car Prices

So, imagine the price of cars imported into the U.S. going up. That’s essentially what’s happening because of new tariffs, or taxes on imports, recently put in place by former President Donald Trump’s administration. Starting in April and May of 2025, a 25% tax applies to many imported cars and car parts.

Goal: Support U.S. Industry

The main idea behind these tariffs is to try and help American car companies and workers. The government hopes that making imported cars more expensive will encourage people to buy cars made in the U.S. and convince companies to build more factories here. This, they say, could create more jobs and strengthen the economy.

The Debate Over Effectiveness

But not everyone agrees this is a good plan. There’s a big debate going on about whether these tariffs will actually help or hurt the economy. It seems like a classic case of a “double-edged sword,” where something has both good and bad effects.

Concerns About Rising Costs

Many economists and people in the car industry are worried. They say these tariffs will make cars more expensive for everyone, not just imports, because even cars made in the U.S. often use imported parts. Higher prices could mean fewer people buy cars, which isn’t good for business.

Fears of Retaliation

There are also concerns about how other countries will react. When the U.S. puts taxes on their products, those countries might put taxes on American products. This is called retaliation, and it can make it harder for American companies to sell their goods abroad, potentially leading to job losses.

The Case for Tariffs

On the flip side, supporters of the tariffs, including some within the government, point to studies suggesting previous tariffs helped U.S. manufacturing and didn’t significantly raise prices. They believe these new tariffs are a necessary step to protect American jobs and industries in the long run.

Vocabulary

Tariffs (noun): Taxes placed on goods imported from other countries.
Example: “The government decided to put new tariffs on imported cars.”
Debate (noun): A discussion in which people or groups state different opinions about a subject.
Example: “There is a lot of public debate about the new policy.”
Economic Impact (noun phrase): The effect that something has on the economy.
Example: “We are studying the economic impact of the new trade agreement.”
Imported (adjective): Brought into a country from another country.
Example: “I bought some delicious imported cheese at the store.”
Domestic Production (noun phrase): The making of goods within a country.
Example: “The goal is to increase domestic production of electronics.”
Boost (verb): To make something increase or improve.
Example: “The company hopes the new advertising campaign will boost sales.”
Economists (noun): People who study economics, the way that money and industry are organized in a society.
Example: “Economists have different ideas about how to solve the problem.”
Retaliation (noun): An action taken in return for an injury or wrong.
Example: “The country threatened retaliation if the tariffs were not removed.”
Supply Chains (noun phrase): The series of processes involved in producing and distributing a commodity.
Example: “The pandemic disrupted global supply chains.”
Reshoring (noun): The practice of bringing manufacturing or production back to a country.
Example: “The new policies aim to encourage reshoring of key industries.”

Discussion Questions (About the Article)

What is the main purpose of the new tariffs on imported cars and parts?
According to the article, what are some worries that economists have about the tariffs?
How might the tariffs affect the prices of cars, including those made in the U.S.?
What does the article say about how other countries might react to the U.S. tariffs?
What do supporters of the tariffs believe will be the positive outcomes?

Discussion Questions (About the Topic)

Why do countries sometimes put taxes on imported goods?
Can you think of other examples where a government policy might have both good and bad effects?
How important do you think it is for a country to make things domestically?
How do trade disagreements between countries affect businesses and consumers?
What are some things governments might consider before deciding to put tariffs on imports?

Related Idiom

“Double-edged sword”
Meaning: Something that has both advantages and disadvantages.
Example: The new policy could be a “double-edged sword” for consumers.

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*This article was inspired by: *The Wall Street Journal, May 18, 2025