Yes, Trump Tariffs Are Costing Billions. No, China Isn’t Paying
U.S. importers are responsible for the duties, and ultimately U.S. businesses and consumers pay through higher costs.
(Bloomberg) -- President Donald Trump is justifying raising tariffs on Chinese imports on grounds they are helping the U.S. economy and are mostly paid by China. The opposite is true, economists say.
According to data from U.S. Customs and Border Protection, almost $15.3 billion in duties imposed by the Trump administration last year were assessed on imported goods from China as of April 10. Actual collections could lag and be lower with refunds and other factors.
While Trump has suggested on Twitter and in public comments that tariffs are somehow being charged to or paid by China, economists say that’s misleading. U.S. importers are responsible for the duties, and ultimately U.S. businesses and consumers pay through higher costs, they say.
“Our results imply that the tariff revenue the U.S. is now collecting is insufficient to compensate the losses being born by the consumers of imports,” a study published in March by economists from the Federal Reserve Bank of New York, Princeton University and Columbia University concluded.
The Trump administration plans to more than double duties on $200 billion in Chinese imports at 12:01 a.m. on Friday in response to what officials said was China reneging on commitments as the world’s two largest economies try to negotiate a sweeping trade deal. China’s top trade negotiator Liu He will travel to the U.S. this week as the high-stakes talks continue.
Trump announced the increase in duties in a tweet Sunday saying “the Tariffs paid to the USA have had little impact on product cost, mostly borne by China.” He has previously suggested that China is paying all but about four of 25 percentage points in duties because Chinese companies would reduce their prices in response to the tariffs.
But those numbers appear to be estimates from a 2018 report based on historical data, said David Weinstein, an economics professor at Columbia University and one of the authors of the March study. Actual data on tariffs and trade from 2017 and 2018 showed that foreign firms didn’t lower their prices at all, so the full impact was born by U.S. firms and consumers, he said.
A separate paper published in March by economists Pinelopi Goldberg, the World Bank’s chief economist, Pablo Fajgelbaum of UCLA, Patrick Kennedy of the University of California, Berkeley, and Amit Khandelwal of Columbia Business School also found that consumers and U.S. companies were paying most of the costs of Trump’s tariffs.
It also went a step further: After factoring in the retaliation by other countries, it concluded the main victims of Trump’s trade wars had been farmers and blue-collar workers in areas that supported Trump in the 2016 election.
“Workers in very Republican counties bore the brunt of the costs of the trade war, in part because retaliations disproportionately targeted agricultural sectors,” the authors wrote.
--With assistance from Shawn Donnan.
To contact the reporter on this story: Mark Niquette in Columbus at mniquette@bloomberg.net
To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Sarah McGregor
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