Trump is wrong about tariffs and who is paying for them
President Trump threw another curveball into ongoing trade talks with China on Sunday, threatening to raise tariffs to 25 percent on $200 billion worth of Chinese goods. Trump was apparently tweeting out of frustration over Chinese resistance to some of his bigger demands; he succeeded in rattling U.S. investors, at least.
In his tweets, Trump again showed he either doesn't understand how tariffs work or, more likely, doesn't seem to think the reality is as politically palatable as his claims that for 10 months, "China has been paying tariffs to the USA," that "these payments are partially responsible for our great economic results," and that "the tariffs paid to the USA have had little impact on product cost, mostly borne by China." He's wrong on most counts.
First, tariffs are taxes paid to U.S. Customs and Border Protection by U.S. importers — that is, U.S. companies or U.S. subsidiaries of foreign companies — not by China. So, for example, Costco would pay the tax on TVs imported for China, explains Howard Gleckman at the Tax Policy Center. "But who really pays the tax on imported goods? The answer, I am sorry to say is, it depends."
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Domestic companies typically deal with the extra tax through some combination of cost-cutting, eating the loss through lower profits, passing the cost on to consumers, asking the Chinese exporter to share the financial burden, or finding tariff-free countries to import from. Economists at the Federal Reserve Bank of New York, Princeton, and Columbia found in February that with Trump's tariffs, the entire burden has fallen "on domestic consumers and importers up to now, with no impact so far on the prices received by foreign exporters."
That study conservatively estimated that the tariffs are costing U.S. consumers and companies $4.4 billion a month. A Congressional Research Report found that Trump's tariffs raised the price of washing machines by as much as 12 percent. And China's retaliatory tariffs have harmed U.S. farmers, especially; despite subsidies to offset those losses, Midwestern farms are declaring bankruptcy at rates not seen since the 2008 financial crisis.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Peter has worked as a news and culture writer and editor at The Week since the site's launch in 2008. He covers politics, world affairs, religion and cultural currents. His journalism career began as a copy editor at a financial newswire and has included editorial positions at The New York Times Magazine, Facts on File, and Oregon State University.
-
Boeing machinists approve contract, end strike
Speed Read The company's largest union approved the new contract offer, ending a seven-week strike
By Peter Weber, The Week US Published
-
US economy still strong in final preelection report
Speed Read It grew at a solid 2.8% annual rate from July through September
By Peter Weber, The Week US Published
-
Boeing machinists reject deal, continue strike
Speed Read The rejection came the same day Boeing reported a $6.2 billion quarterly loss
By Peter Weber, The Week US Published
-
Ports reopen after dockworkers halt strike
Speed Read The 36 ports that closed this week, from Maine to Texas, will start reopening today
By Peter Weber, The Week US Published
-
Empty-nest boomers aren't selling their big homes
Speed Read Most Americans 60 and older do not intend to move, according to a recent survey
By Peter Weber, The Week US Published
-
Brazil accuses Musk of 'disinformation campaign'
Speed Read A Brazilian Supreme Court judge has opened an inquiry into Elon Musk and X
By Rafi Schwartz, The Week US Published
-
Disney board fends off Peltz infiltration bid
Speed Read Disney CEO Bob Iger has defeated activist investor Nelson Peltz in a contentious proxy battle
By Rafi Schwartz, The Week US Published
-
Disney and DeSantis reach detente
Speed Read The Florida governor and Disney settle a yearslong litigation over control of the tourism district
By Peter Weber, The Week US Published