President Trump's characterization of his trade war with China at the presidential debate Thursday evening was an unusually vivid reminder that he does not, in fact, understand how tariffs work.
"China is paying," Trump said. "They're paying billions and billions of dollars. I just gave $28 billion to our farmers — "
"Taxpayers' money," Democratic nominee Joe Biden interjected.
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"It was China — " Trump paused. "It's what?"
"Taxpayers' money," Biden reiterated. "It didn't come from China."
"Yeah, you know who the taxpayer is? It's called China," Trump crowed. "China paid $28 million, and you know what they did to pay it, Joe? They devalued their currency, and they also paid up. And you know who got the money? Our farmers. Our great farmers, because they were targeted."
This misconception — that the country targeted by U.S. tariffs pays those taxes — seems to be lodged deep in Trump's mind. "Billions of Dollars are pouring into the coffers of the U.S.A. because of the Tariffs being charged to China," he tweeted in 2018, thrilling that this would "just make our Country richer than ever before!"
The reality is that U.S. tariffs on foreign imports are paid, as Biden said, by American consumers. Tariffs do raise revenues for Washington, but they do so at the U.S. public's expense, as foreign producers pass these costs along to their customers. Tariffs don't put foreign funds in Washington's coffers.
So that $28 billion in farm subsidies Trump touted — which many farmers, for the record, have said is a shoddy substitute for free trade — was indeed paid by American taxpayers. Because of Trump's trade war, we're spending more on imported goods (paying our own government's tariffs). And we're also paying to subsidize farmers whose business has been hurt, perhaps irreparably, by Chinese retaliation to the tariffs Trump imposed, evidently without a clue about what they really do.
