For years, consumer advocates have opposed soda tax proposals in cities like Berkeley, Boulder, and Philadelphia, because such measures serve as a regressive tax on the poor, who tend to consume soft drinks at much higher rates.
Some of these efforts have proven successful, for example leading to the 2017 repeal of Chicago’s much-reviled soda tax and causing other cities to pause consideration of similar plans. These consumer advocates, however, may have finally met their match: not from public health advocates but instead from President Trump’s tariffs.
Last week, Coca-Cola announced that it is raising soda prices because Trump’s tariffs, including those on aluminum, have raised the cost of production. “There is some broad-based push on input costs that have kind of come in and affected ours and many other industries as well,” said Coke CEO James Quincey.
President Trump, who reportedly drinks 12 Diet Cokes a day, won’t notice the ensuing price increases. But for the fixed income voters who put him in office, higher soda prices are just one of many tariff-induced cost-of-living increases that will reduce their standard of living.
In addition to Coke, major consumer brands have recently said they are raising their prices because of tariff costs. Sam Adams beer is raising prices soon. “At some point, increased commodity costs have to be passed through to some extent,” said Chief Executive Jim Koch.
Polaris, which makes boats, snowmobiles, motorcycles, and recreational vehicles, announced it Is raising prices to contend with $40 million of tariff-related costs. Another RV manufacturer, Winnebago, also recently announced tariff-related price increases.
Steelcase, an office furniture maker, has had to raise prices twice in a matter of months to try to contend with the costs associated with Trump’s 25 percent tariff on foreign steel. “It’s been a long time, if ever, that we’ve done two price increases back to back as quickly as we did,” said Chief Executive James P. Keane.
Lennox, an HVAC manufacturer, has raised prices to contend with roughly $25 million of tariff-induced costs this year, noting all its competitors have done the same. Labor Department data reveals washing machine prices are up nearly 20 percent over the last three months because of tariffs, hitting American homeowners hard — especially as “fair trade” duties have caused lumber prices to spike too.
This anecdotal evidence is backed up by the data. Prices of U.S. steel and aluminum, which are inputs in many goods, are up 33 percent and 11 percent this year, respectively. According to the Labor Department, consumer prices rose by 2.9 percent in June, the fastest pace in six years.
As numerous studies show, inflation — whether caused by protectionism or other factors — disproportionately hurts the poor and middle class who see their budgets busted, and their already-stretched retirement savings diminished. These costs threaten to swamp the pocketbook savings these ordinary Americans receive from the president’s tax cuts passed late last year.
Some proponents of the tariffs argue that the short-term pain of higher prices is worth the long-term gain of cracking down on countries that impose higher tariffs than the U.S. But this is a dangerous game. Recent history shows that tariffs intended to pry open foreign markets failed far more often than they succeeded, yet caused significant financial and economic hardship in the process. And if U.S. trading partners played a similar game, American exporters could face new tariffs due our own high barriers to imports of trucks, sugar, footwear, or other items.
Scott Lincicome is an international trade attorney and a senior policy analyst for Republicans Fighting Tariffs.
