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Donald Trump’s declaration that tariffs on $200 billion of Chinese goods would jump to 25 percent in May gave rise to a firestorm of claims that the import taxes hurt U.S. consumers.
Recent history, however, suggests that these claims lack a basis in evidence. That’s a polite way of saying that they’re flat-out wrong.
Fact - Donald - Trump - Insistence - Consumers
In fact, Donald Trump’s insistence that American consumers do not suffer from tariffs is entirely borne out by the data.
Neither the tariffs placed on steel and aluminum imposed a year ago nor the more recent ten percent tariff on Chinese goods pushed prices of goods sold to consumers up. And now we have price data from May that once again indicate no tariff pricing pressure on consumers.
Tariffs - US - Government - Billions - Tariffs
So who is paying for the tariffs? We know the U.S. government has collected billions in tariffs, so it is clear that someone is footing the bill. But keep in mind that when journalists and lobbyists claim, “tariffs are taxes on consumers,” this is inaccurate.
Tariffs are taxes, to be sure. But unlike a sales tax or a gas tax, consumers do not directly pay any tariffs. Tariffs are paid by importers, often large U.S. companies that are importing from their own foreign subsidiaries or foreign contractors. But businesses cannot raise their prices just because their costs or taxes go up. Sometimes they have to absorb the costs.
Wages - Inflation - Costs - Prices - Cut
We have seen this recently with wages, which have been rising faster than inflation, which means costs are rising faster than prices. Conversely, the massive cut in corporate taxes enacted at the end of 2017 did not automatically translate into businesses slashing prices because their tax costs had fallen.
In addition, the Chinese currency has depreciated over the past year, which makes imports from China less expensive. And there is anecdotal evidence that Chinese manufacturers are slashing...
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