Trump and Harris clashed over tariffs during the debate. Here’s how they affect your wallet.

Tariffs are costs imposed on goods imported from other countries. But how effective are they really and when do they start to harm the economy?

That question is now at the heart of the opposing positions of the two American presidential candidates. While Vice President Kamala Harris is proposing a mix of tax cuts for the American middle class and higher taxes on richer people to boost growth and reduce the deficit, former President Donald Trump is proposing something more novel: massive tariffs to both protect US industry and raise government revenue.

During the presidential debate on Tuesday night, Trump reiterated his commitment to his plan, which calls for a 10 percent tariff on all imported goods and a 60 percent tariff on goods imported from China.

“After 75 years, other countries are finally going to pay us back for everything we’ve done for the world, and the tariffs are going to be significant,” said Republican presidential candidate Trump, adding that his proposed 10% across-the-board tariffs would raise “hundreds of billions of dollars.”

Democratic candidate Harris responded that tariffs were effectively a “sales tax” on American households.

In fact, the Biden administration recently imposed its own tariffs while extending tariffs first imposed under Trump. Harris has not explicitly stated whether she will extend them, but on her campaign website she said she will continue to “support American leadership in semiconductors, clean energy, AI and other cutting-edge industries of the future” while opposing “unfair trade practices by China or other competitors that undermine American workers.”

While potentially sensitive, the dispute over tariffs is central to understanding the candidates’ economic policy visions – not to mention how third parties have assessed the potential of each plan.

In the most optimistic case, Trump’s tariffs would bring in up to $2.5 trillion over ten years, estimates the business-friendly Tax Foundation. However, the organization expects that this revenue would barely cover half of the tax cuts and spending proposals that Trump has also outlined.

Meanwhile, most forecasts for Harris’ economic plan point to a more balanced outcome between higher government revenues for the US, tax relief and spending plans.

Tariffs ultimately involve trade-offs. The cost of tariffs is never shown on the receipts of major retailers, but many economists believe that consumers end up paying higher prices when tariffs are imposed because the companies that pay the tariff costs up front end up passing them on to others.

But tariffs can also increase the number of American jobs and secure them.

One example is the tariffs the Trump administration imposed on washing machines in 2018. According to the Coalition for a Prosperous America, a bipartisan group that advocates for stricter foreign trade policies, the tariffs on washing machines created over 2,000 jobs and spurred growth in the two southern U.S. communities where Korean appliance makers eventually built factories to avoid the tariffs.

However, according to a scientific study, the cost of these jobs was around $815,000 per position, while the price of washing machines rose by as much as 10 percent.

The tariffs on washing machines were part of a sweeping new tariff regime Trump implemented to protect American workers from anti-competitive Chinese trade practices, leading to a “trade war” that is widely viewed as retaliatory tariffs on American goods.

In the wake of the pandemic, the “war” subsided somewhat.

But when the Biden administration adopted its own tariff policies this spring, some of them were a continuation of those imposed by Trump. In May, for example, Biden announced a series of new tariffs on a range of goods, including steel and aluminum, but also semiconductors, electric vehicles, batteries and solar panel parts.

When announcing its tariffs, the White House gave a similar justification to the Trump administration.

“American workers and companies can outcompete anyone – as long as there is a level playing field,” Biden said in a press release. “But the Chinese government has used unfair, non-market practices for too long.”

Most economists agree that tariffs can support domestic industry. But ultimately, they can also lead to higher costs for the entire economy.

Douglas Irwin, one of America’s leading trade historians, summed up the dilemma in a 2018 interview with the business-friendly American Enterprise Institute.

“There is no denying that certain workers in certain industries have suffered from increased foreign competition,” he said, “but when you look at the productivity gains that come from trade, the jobs created by exports and the benefits to consumers, I would say America is doing better overall.”

“But,” Irwin continued, “there is no denying that certain groups are potentially worse off because of the lack of protection.”

Assessing the economic impact of tariffs often relies on assumptions and calculations that can produce very different results. The Committee for a Responsible Federal Budget, a bipartisan group, wrote that Trump’s proposal to impose 60 percent tariffs on China “would generate up to $300 billion in net revenue over a 10-year period or lose up to $50 billion … depending on the proportion of Chinese imports replaced by domestic or foreign goods, respectively.”

The committee said the revenue increases in Trump’s proposal, amounting to $2.5 trillion over 10 years, “would have a significant impact on government finances and significantly slow the growth of the national debt.”

However, the group added that this could have “significant economic impacts”, such as reduced purchasing power and increased uncertainty for the business community.

Free trade advocates prefer to negotiate terms directly with other countries – but even then, countries with which the US has friendly agreements are accused of violating such deals. Mexico has come under fire for allegedly breaking a joint steel agreement signed by Trump in 2019, leading to the closure of US steel mills, including in Ohio, New York and most recently on Chicago’s southwest side.

“Ohio steelworkers can no longer wait for Mexico’s fraud to stop,” Senator Sherrod Brown (D-Ohio) said in a joint statement with Senator Tom Cotton (R-Arkansas) in March. “Workers are losing their jobs and Ohio companies are losing business now. If Mexico breaks the rules it agreed to, the government must hold it accountable.”

Officials of the companies responsible for the plant closures have cited inflationary pressures in the U.S. as the reason for the closures. The battle over the future of U.S. Steel, whose plans to be acquired by a Japanese conglomerate could now be blocked by the Biden administration, is also tied to broader economic forces that have long destabilized the American manufacturing industry.

Nick Iacovella, senior vice president of public affairs at the Coalition for a Prosperous America, a trade group that advocates for tariffs, said opponents of tariffs often mistakenly assume that domestic manufacturing cannot be improved.

He said interest groups often seek to spread reports showing that tariffs do not work in order to justify “spending the last two or three decades moving production and jobs to countries where there is cheaper labor and lower environmental standards.”

“Many working-class Americans are suffering from China’s outsourcing and unfair and illegal trade activities,” Iacovella said. “Our communities are being hollowed out, including as a result of free trade agreements.”

But for every job protected by tariffs, there is often another domestic industry that could see job losses. According to economists at Harvard University and the University of California, Davis, Trump’s steel tariffs have ultimately hit companies that use steel as an “input” to produce finished goods, such as auto and appliance manufacturers.

“The job losses resulting from the threat to these steel-using industries appear to be substantial, far exceeding any jobs that would have been created in the steel-producing industry as a result of the tariffs,” they wrote in a 2020 report.