Indianapolis stockbroker explains how customers will pay for tariffs

INDIANAPOLIS — Consider the loss of trillions of dollars on the stock market a sign of what could be coming — a downturn in the economy as products get more expensive, causing consumers to pay more on nearly everything they buy.

“Prices will go up,” said Korel Drake, an Indianapolis-based stockbroker. “Tariffs are taxes on the company that is importing the product.”

Drake deals with the fluctuating prices of goods every day. He said one of the places you will notice a change first is at the grocery store.

Take a banana, for example. A store like Walmart is likely importing those bananas from countries in Central and South America. Think of the tariff as a shipping tax that Walmart must pay for the bananas to enter the United States. Drake said any store that has a goal to make money will pass that cost onto the customer.

“They are a for-profit organization,” Drake said. “It would make no sense for them to absorb the cost of the same product and not make money off of it. They’re not going to make less money because the government has decided to put a tariff on imports.”

The goal of a tariff on imports is to encourage businesses to buy products from sellers in their own countries. In the case of bananas, Walmart could instead get bananas from Florida or Hawaii. But for a list of reasons, including hourly wage, it’s cheaper to buy those bananas from Central and Southern America.

“The reason they are importing these products is because they’re more cost-effective than getting that product from any place else,” Drake said. “Hence, the tariffs are going to raise the price, and it’s going to be moved to the consumer.”

President Donald Trump said these tariffs will create more jobs in America. In the case of bananas, more companies would create jobs by having more American banana farms.

But Drake said the only way that would be successful is if you pay Americans to grow bananas at the price you would in countries with lower wages. 

“You can’t even get a kid in high school to work at McDonald’s for $5.00 an hour,” Drake said. “How are you going to get a responsible adult who’s taking care of his family to do it is beyond me. But that’s what the current administration thinks is going to happen. It’s above my pay grade. I’m just explaining to you how tariffs work.”