I hesitate to opine on whether or not President Trump really understands how tariffs work. That said, however, his statements strongly suggest that he doesn’t understand how tariffs work at all. That’s really troubling for a man who calls himself Tariff Man, and is now aggressively imposing tariffs as a way to raise federal revenue.
Tariffs are really nothing more than taxes levied by our government on an imported product at the point that product enters the United States. The importer pays the tariff and will then invariably pass the cost on to whoever ultimately buys the product.
President Trump thinks tariffs are a great way to raise revenue for the government. Well, he’s right about the ease with which tariffs raise revenue, but he’s entirely wrong to suggest that anyone other than the American purchaser of that product will bear the cost of the tariff, which is simply a tax by another name. The cost of the tariff will be incorporated into the price of the imported product, and will be recaptured when the American consumer pays for that product. Let me repeat that. Tariffs are a tax imposed by our Government on the importer who will then recapture that cost when the product is sold to an American buyer. Yes, it’s really that simple.
Former Trump national security advisor, John Bolton, summed up Trump’s obsession with tariffs during an interview with CTV, a Canadian television network.
Bolton: “With Canada, it’s Trump’s obsession with tariffs. It’s something he’s had his entire career, as far as I can tell. He doesn’t understand tariffs. He doesn’t understand how they work. He thinks when we impose big tariffs on Canadian imports, Canadians will pay for it. He does not understand, although I’ve heard it explained to him in simple words, that the American importer pays the tariff and then tries his best to pass it on to American consumers. But when you don’t understand how tariffs work, they look pretty attractive.”
Trump’s repeated claims that the foreign producer or exporter of the product pays the tariff is unequivocal nonsense. But nonetheless, he seems to believe it.
Listen to President Trump at a rally in Arizona in mid-August last year when he claimed that Vice President Kamala Harris, his Democratic opponent, was lying when she said that Americans would ultimately pay for Trump’s tariffs.
“She is a liar. She makes up crap … I am going to put tariffs on other countries coming into our country, and that has nothing to do with taxes to us. That is a tax on another country.” Well, no it isn’t. Kamala had it right.
This is breathtaking ignorance about how tariffs work. Then last September he doubled down and repeated his tariff nonsense during an interview with Fox News. Listen to him: “It’s not a tax on the middle class. It’s a tax on another country.” And then again during a rally last year in Wisconsin. Listen to him: “it’s not going to be a cost to you, it’s going to be a cost to another country.”
That simply isn’t true. American consumers will, ultimately, pay the cost of Trump’s tariffs. A tariff, like any other cost, will simply be recaptured when the product is ultimately sold to the buyer in the American marketplace.
Here, in a nutshell, is how tariffs are applied at the 328 different entry points into the United States. Customs and Border Patrol personnel collect tariffs from the American businesses that are importing products from abroad. An electronic payment system is used by the United States that simply deducts the amount of the tariff from the American importer’s bank account. And what do you think the American importer does then? The importer will then, invariably, add that cost to the price of the product. With few exceptions, the ultimate consumer always pays.
How much will the average American consumer pay because of the new Trump tariffs? Quite a bit, according to Dr. Bedassa Tadesse, Professor of Economics at the University of Minnesota. For example, Texans, would, collectively, pay $15.3 billion. Californians would suffer a $10.2 billion hit, and Michiganders, would experience a $6.2 billion blow, which is over 1% of Michigan’s Gross Domestic Product.
Some smaller states such as New Mexico, Kentucky and Indiana, which are heavily trade dependent, would be even more severely hurt. Dr. Tadesse projects that these states’ citizens would experience projected losses equivolent to 1.12% to 1.48% of their state’s Gross Domestic Product. New Mexico consumers would bear the highest per-person pain which, Dr. Tadesse says would translate to about $822 for every resident. A family of four in New Mexico would face a hit of more than $3200. Families residing in Kentucky and Indiana would wind up with an additional $3120 and $2836 of tariff-related expenses respectively. Dr. Tadesse projects that Texas families would experience an additional household expense of over $2,000.
These projected tariff-related expenses with which American households will be burdened because of President Trump’s infatuation with tariffs will have real life consequences for tens of millions of families.
The tariff pain imposed on American families will be further compounded by President Trump’s aggressive and somewhat ill-defined plan to cut the size of the government’s payroll. American taxpayers should not be shouldering the cost of inefficient or unproductive federal employees any more than private sector companies would tolerate unproductive workers. However, work force reduction should be the result of a thoughtful effort to determine where cuts should be made and which personnel are essentially dead weight.
There could well be entire programs that could be eliminated without compromising the task of efficiently running the government. However, the mass firing or buyout of tens of thousands of federal employees to meet an arbitrary payroll reduction quota is ham-handed and risks losing productive personnel along with those who are expendable.
A thoughtful review of the various offices and programs of the federal government to determine which can be curtailed or even eliminated should have been undertaken before arbitrarily “buying out” employees, or turning Chain-Saw Musk loose to make a spectacle of terminating the employment of tens of thousands of American men and women.
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Recent podcasts have featured my commentary on Liz Cheney’s book, “Oath and Honor,” as well as my commentaries regarding:
U.S. Representative Jim Jordan,
Brian Kemp and Those Republicans of Georgia,
The Trump Indictments,
The Fox Corp Settlement,
The CNN Trump Town Hall,
The Hunter Biden plea deal,
The New American Cult of Personality,
and my interviews with William Bratton, Retired Chief of Police in New York City, Los Angeles, and Boston;
Rikki Klieman, Attorney, Network News Analyst, and best-selling author;
John Thoresen, Executive Director, Barbara Sinatra Children’s Center;
Katherine Gehl, co-author of The Politics Industry and founder of the Institute for Political Innovation;
