Tariffs have been a key focus of the Trump Administration’s economic plan. The idea is that the US will use its trade deficit, normally a weakness, as a strong bargaining chip to either entice companies to produce goods for the US market in the US or pay a tax to offset the negative impact of the US trade deficit. How this strategy will work out in the long-term remains to be seen.
Now the US trade policy has shifted to include a tax on goods that the US sells abroad, often called an export tax. So far, the focus is on areas where the US has a strong competitive advantage, specifically advanced microchips where US companies lead the world, that are sold to China.
This addition to the US trade policy represents another distortion of the free market and could set a negative precedent in which US companies must pay the US government to access markets. In addition, US exports of microchips to China were originally limited for national security reasons. Now policy has shifted based on the belief that cutting off the Chinese market will create incentives to increase investment in developing more powerful microchips in China whereas access to US chips may undercut that effort. Even if that makes sense from a national security standpoint it begs the question: What does this have to do with the US tax policy?