Trump Calls Himself Tariff Man. Tax Man Would Be More Accurate.

I defer to William Shakespeare, who famously taught that “A rose by any other name is still a rose. And so are taxes by any other name (call them tariffs) still taxes.

So, President-elect Trump wants to impose tariffs on foreign-made products to raise revenue for America. Donald Trump says he loves tariffs and wants to be thought of as “Tariff Man.” He seems to believe that tariffs produce free revenue for America. They do not. He should rethink his infatuation with tariffs. Ultimately, Trump the Tariff Man becomes Trump the Tax Man because the imported products on which tariffs are levied will invariably be priced (indirectly taxed) to recapture the cost of those tariffs.

True, some importers may choose to eat the cost of a tariff, but generally, costs incurred are recaptured when the product is sold. The ultimate consumer typically pays for the goods procured, including the cost of tariffs.

Products produced abroad and imported into the United States may be burdened with the added cost of an import tariff. The American importer will typically recapture the cost of the tariff he has paid through the price he ultimately charges for the product. The tariff (or tax) on an imported product will invariably be passed on to the ultimate buyer of that product. Suggesting otherwise, as Trump often does, is nonsense.

President-elect Trump, who says he loves tariffs because of the revenue tariffs produce, should know, as the late Nobel economist Milton Friedman famously taught, that there is no free lunch. The tariffs that Trump would impose to raise revenue are simply taxes that American consumers will pay when they buy the products on which the tariffs have been imposed. President Trump, the Tariff Man (as he likes to call himself), is essentially Trump the Tax Man.

Understand this: the buyer invariably pays the ultimate cost, including the cost of any tariff imposed on his purchase.

There is no free lunch. The admonition that “the buck stops here” applies to the cost burden tariffs impose on imported product purchasers. That is always where the proverbial buck stops: at the point of sale, where the ultimate consumer pays the ultimate cost of the product he or she purchases. If that product is burdened with a tariff, that cost will invariably be reflected in the price charged for that product.

It’s not that complicated. Tariffs are taxes levied on an importing business (or individual) when the goods he or she has purchased arrive in America. While the importer could choose not to pass that added cost on to the customer or buyer, it is a good bet that the customer will pay the full cost, including any tariff on the product he or she has purchased. With imported automobiles, for instance, the tariffs (or taxes) are levied on the importer by U.S. Customs when the cars enter the country. Those tariffs are then passed on to whoever purchases the car.

The costs that accumulate as a product moves through production (and through customs if the product is produced abroad and imported into the United States) are built into the sales price the consumer ultimately pays. If, for instance, an automobile is manufactured abroad and imported into the United States, the cost of the tariff will eventually be paid by whoever purchases the car.

Trump Talks Tariff Nonsense

When defending his tariff plans, Trump repeatedly, and wrongly, has insisted that other countries will pay the tariffs he has in mind.

“We’re going to be a tariff nation. It’s not going to be a cost to you. It’s going to be a cost to another country,” Trump told supporters at a Wisconsin campaign rally last September.

President-elect Trump either doesn’t understand how tariffs work, which I seriously doubt, or he is just being outrageously disingenuous when he talks about tariffs. Listen to him.

“I’m not raising your taxes. I’m raising China and all of these countries in Asia and all over the world, including the European Union, by the way, which is one of the most egregious,” (sic) he assured a crowd. “And they’re going to have to pay the price now because we’ve been supporting them for a long time, and it’s no longer sustainable.”

But the soon-to-be president is wrong. In the U.S., importers pay the tariffs in the form of customs duties, which are collected at ports of entry by U.S. Customs and Border Protection. In most cases, those importers pass their increased costs on to consumers through the price they charge.

“A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter,” says Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation (NRF). “This tax ultimately comes out of consumers’ pockets through higher prices.”

The NRF reports that a universal tariff of 10% to 20% on imports from other countries plus a 60% to 100% tariff on imports from China, which Trump has promoted, would affect prices on apparel, toys, furniture, household appliances, footwear, and travel goods. According to the retail association, Americans' spending power on those six product categories alone could be reduced by between $46 billion and $78 billion annually.

The Peterson Institute for International Economics (PIIE), a nonpartisan think tank, says that Trump’s 20% tariff on all goods and a 60% tariff on China would increase the costs of a typical middle-income household by more than $2,600 a year.

“But this estimate is very conservative,” PIIE senior fellow Alan Wolff, a former deputy director-general of the World Trade Organization, wrote last September. “It does not consider that domestic producers will likely raise their prices if a US global tariff takes effect, and it does not consider other costs to American wage earners when foreign retaliation results in the loss of higher-paying jobs producing goods and services to sell abroad. These consequential effects substantially increase the costs to the US economy.”

In addition, the left-leaning Center for American Progress says that a middle-income family would pay $2,500 more each year if Trump’s 10% and 60% tariff proposals are implemented. If a 20% basic tariff goes into effect, the group says, that increase would grow to $3,900 annually.

Meanwhile, a senior economist and research director at the pro-business Tax Foundation, Erica York, says that a 20% tariff on all imports and a 60% tariff on imports from China could increase household costs by an average of more than $6,000.

The Tax Foundation reported that the Trump administration’s tariffs in 2018 and 2019 amounted to nearly $80 billion worth of new taxes on Americans. President Joe Biden’s administration kept most of those tariffs in place and then raised tariffs on an additional $18 billion worth of Chinese goods.

“As of March 2024, the trade-war tariffs have generated more than $233 billion in higher taxes collected for the US government from US consumers,” the Tax Foundation said. “Of that total, $89 billion, or about 38 percent, was collected during the Trump administration, while the remaining $144 billion, or about 62 percent, has been collected during the Biden administration.”

It remains to be seen what Trump will do once he takes office next month. Some analysts are taking his tariff proposals seriously, while others have said he may just be using the threat of higher tariffs to negotiate better trade terms with other nations.

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