China Is Paying Less Than 8 Percent of Tariff Costs. Americans Are Paying the Rest

No biggie. Americans can just print more of their Monopoly money and send themselves more checks

Former President Donald Trump and his top trade advisers spent years arguing that tariffs applied to imports from China were not being paid by Americans—despite what economic theories and actual reality suggested.

Since taking office, the Biden administration has picked up that same line of argument. U.S. Trade Representative Katherine Tai said during her confirmation hearing in February that she views tariffs as “a legitimate tool” to wield against China—the obvious implication being that tariffs are applying some sort of economic pressure on China that the Biden White House could use for political purposes, in much the same way as Trump sought to do.

Both are wrong.

American consumers are bearing nearly 93 percent of the costs of the tariffs applied to Chinese goods, according to a new report from Moody’s Investors Service. Just 7.6 percent of the added costs of the tariffs are being absorbed by China, the investment firm found.

And it gets worse. When China responded to Trump’s tariffs by slapping new tariffs on many American goods, American firms paid a significant price. That’s because “U.S. exporters, unlike China’s exporters, lowered by roughly 50 percent the prices of goods affected by foreign retaliatory tariffs, carrying a much higher cost burden than foreign importers of goods under U.S. tariffs,” writes Dima Cvetkova, an associate analyst at Moody’s and author of the report.

In other words, American companies ended up on the losing end of the trade war both going and coming. Importers absorbed most of the cost of the Trump tariffs, and American businesses that export to China got hit by the retaliatory tariffs worse than Chinese exporters to the U.S. did.

Prior to 2018, the average American tariff on imports from China was just 3.1 percent, according to data from the Peterson Institute for International Economics. But after Trump hiked tariffs on a wide range of imports covering everything from industrial goods to toys, the average tariff on imports from China is now 19.3 percent. Retaliatory tariffs imposed by China hiked its duties on American-made goods from 8 percent to 20.7 percent.

More than half of the goods traded between the world’s two largest economies are now subject to tariffsaccording to PIIE data, up from less than 1 percent before the trade war began. The so-called Phase One trade deal inked by the Trump administration and Chinese government in December 2019 (there never was a second phase) barely had any impact on those figures.

The Moody’s report only adds to a growing body of evidence showing that Trump-era tariffs have been a loser for the American economy. According to the American Action Forum, a free market think tank, Trump’s tariffs (and retaliatory tariffs imposed by other countries) have increased annual American consumer costs by about $57 billion. The Tax Foundation estimates that Trump’s tariffs amount to an $80 billion tax increase on U.S. businesses. And researchers from Columbia University, Princeton University, and the Federal Reserve Bank of New York concluded that the tariff costs “have been passed on entirely to U.S. importers and consumers.”

More than three years after Trump launched his trade war and four months after President Joe Biden inherited it, the consequences of the tariffs should no longer be subject to debate. The evidence is overwhelming and one-sided: American consumers are being hammered.

And that will continue, no matter what wishful thinking emerges from the politicians in charge of trade policy. “If the tariffs remain in place, pressure on US retailers will likely rise, leading to a greater pass-through to consumer prices,” Moody’s warns.

With consumer prices already rising due to a combination of inflation and a possibly overheating economy as the COVID-19 pandemic fades, Biden could easily offer a bit of relief by cutting the tariffs his predecessor imposed. Continuing to fight a losing trade war is both a choice and a mistake.

Source: Reason Magazine

  1. Ronnie says

    Who would have thought….

    Corrupt Politicians and Casinos Flippers are not, “ Nation Building Titans.”

    Idiot academic anal whispers are even worse.
    Career Bureaucrats are lower than a snakes butt and the military can and do spend money like the ex with your credit card.

    Non of them can build anything that makes anything.
    It takes old fashioned, “mom and pa,” business attitudes.
    ITS GOTTA MAKE A STEADY PROFIT AND GROW. Plus decent wages for the employees. Give hard work a chance.

  2. yuri says

    “amerikans are ignorant and unteachable”. George Satayana
    mean bitter racists accelerating demise of empire

  3. ken says

    Hey,,, That’s the way tariffs work! Gov puts a 10% tariff on xyz goods. The lemmings pay the tax at purchase time.

    Now sometimes the importer may cover some or all the cost but its not the norm.

    Now,,, If one looks at the ‘data’ as they say,,, one will discover it’s the American corporations that moved their factories to China making up probably over 75% of the trade deficit. They are now importers!

    So if you want to blame someone,,, blame the US corporations and US government that allowed this sorry situation to occur.

    With consumer prices already rising due to a combination of inflation and a possibly overheating economy as the COVID-19 pandemic fades”

    Both causation’s are the result of piss poor to unbelievable Federal Reserve management and poor government policy.

    The plandemic that politicians and the medical nazis used to illegally shut the economy down has not ended in my opinion,,, only paused until they can get their acts together.

    They flooded the economy with trillions of funny money causing the shortages and price increases of goods and services.

    Too much money chasing the same amount of goods makes it APPEAR there are shortages. No shortages,,, just too much currency. Prices may stabilize but they will still be higher because of the added currency and that is assuming no more deficits and/or helicopter money. That’s not going to happen so stand by for stand by.

    Since 2008 inflation has been running at 8-10% and is now probably well north of 15%.
    And no,,, I’m not talking about the BLS BS.

    I can remember when Nixon instituted price controls and the whole country was going ballistic over inflation which crept up to a whopping 4%. Paul Volker came in and increased interest rates above 20% killing inflation. Can’t do that today because of the tremendous debt. Imagine the government paying 20% interest on 30 trillion dollars. Talk about ‘i m p l o s i o n’!!! (lol)

    Nope,,, the fat lady hasn’t sung yet but when she does its going to be a doozy!

    1. Mark says

      I agree with most of this, and it is a pity the government apparently has no grasp of economics. You would think from the salaries they command that one or two bright sparks might be in the bunch. But the truth is that the pendulum has probably swung too far already. The Chinese enjoy routinely humiliating America with yawning trade deficits, and their amusement was likely heightened by Trump’s fatuous insistence that the Chinese were going to be tremendously damaged by his plan. But China is the USA’s largest trading partner. There is no practical way for the USA to end the relationship – not without paying out billions more in disaster cash to companies who are ruined thereby – and at the same time the USA cannot get on top and swap the dynamics so it is the Chinese who are getting further behind every year. The Chinese economy has already passed the USA in per-capita purchasing power parity terms. America’s spastic flopping now is doing nothing to reverse that. At the same time, American companies in China make money at China’s pleasure, and they remain tremendously vulnerable.

      The partisan battle against Huawei taught the Chinese that America cannot be trusted, and will not hesitate to lie to drag its allies into the fight. So even admitting past faults and trying to forge an honest partnership with China is out, not that it would ever be considered by such an arrogant nation. So the situation will have to play out to its inevitable miserable conclusion.

  4. kkk says

    Zionist mafia pulls the strings

  5. yuri says

    amerikan negotiate like ferenghi—gypsy tricks ferenghi, Borg comprehends ferenghi too stupid to assimilate, send to USA with existing “bewildered herd” as Lippmann described amerikans

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