Former President Trump took to the stage in Warren, Michigan on October 1st, 2022, and continued falsely claiming that the United States has been collecting money from China due to tariffs. The audience applauded this statement, but it is nothing more than a bald-faced lie. In reality, the country that tariffs are levied against actually never pays for them, and they almost always end up being passed on to consumers in the form of higher prices. Trump’s tariffs have also played a role in the current inflation problem we see in America.
Does China Pay the tariffs?
A trade war between the United States and China hit thousands of internationally traded goods in 2018 and 2019. The trade tariffs leveled by the US and China’s retaliation against American exporters effected about 2% of GDP in 2021. Given that the total Chinese imports are approximately 5% of GDP, 2% is significant.
Tariffs are paid by U.S. importers of the goods, not by China. And while Chinese exporters may have absorbed some of the cost to remain competitive in the U.S. market, research suggests that much of the cost has been borne by U.S. firms and consumers through reduced efficiency and higher prices for both inputs and final goods.
In other words, Trump’s tariffs have not only failed to collect money from China but have actually hurt the American economy and cost American consumers an estimated $81 billion in 2021. Not only is Trump lying about the success of his tariffs, but he is also responsible for a hit on the economy
In July, U.S. Treasury Secretary Janet Yellen said that some tariff reduction might be required in the near term and that some of the tariffs “ended up being paid by Americans, not by the Chinese, hurt American consumers and businesses.”
Are tariffs inflationary?
The main way that tariffs can cause inflation is by raising the prices of goods and services imported into the country. When the prices of these imported goods go up, businesses often pass on these higher costs to consumers in the form of higher prices for their products. This can lead to a general increase in prices across the economy, which is what we call inflation.
The data back up what economists had said at the start of the trade battle: tariffs are not a good way to aid US manufacturing. By doing this, they not only raised prices for everyone but caused the hardest economic blow to be felt in the Midwest. Consequently, the entire US economy is worse off now.
By eliminating the Trump-era tariffs, prices for consumers will fall. Most research estimates between 0.5-1.5 percentage point reduction if these taxes on Chinese goods return to the pre-Trump rate. While these numbers sound small, the value to the average household is around $800. (“For Inflation Relief, the United States Should Look to Trade Liberalization”, Gary Clyde Hufbauer, Megan Hogan, and Yilin Wang, Peterson Institute for International Economics, March 2022, https://www.piie.com/blogs/realtime-economic-issues-watch/can-liberalizing-trade-reduce-us-cpi-inflation-insights)
So not only have Trump’s tariffs failed to collect money from China, but they have also helped contribute to inflation in the United States. This is just one more example of how Trump’s economic policies have failed the American people. However, Biden is simply adding to the economic issues and here is why.
Biden got rid of the tariffs, right?
President Joe Biden has been focused on beating inflation recently. However, until lately, no mention of the large tariffs on Chinese imports that he inherited from the Trump administration has been made in this discussion. A country imposes tariffs for different reasons. Perhaps you want to protect domestic industry or raise revenue. While some in the Biden Administration argue for tariff reduction, others point to losing a policy tool – the stick. So far, it seems the stick people have won that battle.
In short, Trump’s tariffs have been nothing but a burden on the American people, and his false claims about them need to be called out. We can only hope that President Biden will right the ship and end this trade war once and for all.
So why does Trump continue to lie about his tariffs? The answer is simple: he knows that his base of supporters will believe anything he says, no matter how ridiculous or blatantly false it may be. And as long as Trump can keep lying to his supporters, he will continue to have a hold on the Republican Party.
What do you think about Trump’s tariffs? Do you believe that China actually pays the tariffs? Do you think Trump’s tariffs are good for America? Why or why not? Let us know in the comments below.
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