Trump’s Malignant Trade War Reflects His Economic Ignorance

Larry Kudlow, Donald Trump’s chief economic adviser, understands that tariffs on Chinese imports are a tax paid by American companies and consumers — a point his boss refuses to acknowledge. The president’s weird insistence that “China” pays the tariffs reflects not just his reluctance to take responsibility for tax increases but his longstanding, sincere and fundamentally mistaken views on international trade — views that do not bode well for the outcome of his trade war.

“Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products,” Trump tweeted last Friday. As Kudlow conceded in a Fox News interview on Sunday, that is not how tariffs work. U.S. importers pay the tariffs, and they respond by reducing their profit margins, raising prices or both.

A recent study of Trump’s tariffs by economists at Princeton, Columbia and the Federal Reserve Bank of New York noted that, in 2018, “The U.S. experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and complete passthrough of the tariffs into domestic prices of imported goods.” By the end of the year, they estimated, the tariffs were costing Americans $3 billion a month in added taxes and another $1.4 billion a month in lost efficiency.

View the complete May 14 article by Jacob Sullum on the National Memo website here.