Assessing Truthfulness: Trump and Vance Continuously Misrepresent the Mechanisms of Tariffs
At a gathering in Arizona in mid-August, Trump contended that Kamala Harris, his political adversary, is misleading when she refers to his tariff strategy as a "Trump tax."
"She's a liar. She fabricates lies ... I am going to impose tariffs on foreign countries entering our country, and that has nothing to do with taxes for us. That is a tax on another country," Trump asserted.
Later in September, he reiterated this assertion during an interview with Fox News: "It's not a tax on the middle class. It's a tax on another country."
He continued to express this sentiment at a rally in Wisconsin on Saturday, stating, "it's not going to be a cost to you, it's going to be a cost to another country."
Vance declared in late August that as a result of tariffs Trump implemented during his tenure, "prices decreased for American citizens."
"They increased for the Chinese but they decreased for us," Vance added.
However, this is not accurate.
Factual Check: Trump and Vance's assertions about tariffs are inaccurate. A tariff is a tax that US companies pay when a foreign-made product arrives at the US border. One of the intended goals of a tariff is to increase the price of foreign-made goods, and numerous studies have shown that tariffs indeed raise costs for Americans.
Tariffs are a form of tax
Here's how tariffs function: When the US imposes a tariff on an imported product, the cost of the tariff is directly deducted from the American purchaser's account.
"It's reasonable to refer to a tariff as a tax because that's exactly what it is," stated Erica York, a senior economist at the right-leaning Tax Foundation.
"There's no escaping it. It is a tax on people who buy goods from foreign businesses," she added.
Trump has promised that if he is re-elected, he would impose tariffs of up to 20% on all foreign imports entering the US, as well as another tariff exceeding 60% on all Chinese imports. He also announced he would impose a "100% tariff" on countries shifting away from using the US dollar.
These duties would build upon the tariffs he imposed on foreign steel and aluminum, washing machines, and numerous Chinese-made goods such as "baseball hats," luggage, "bicycles," TVs, and "sneakers." President Biden has left the majority of the Trump-era tariffs in effect.
Numerous studies, including one from the US International Trade Commission, have found that Americans have shouldered nearly the entire cost of Trump's tariffs on Chinese goods. To date, Americans have paid over $242 billion to the US Treasury for tariffs that Trump imposed on imported solar panels, steel, aluminum, and Chinese-made goods, as per US Customs and Border Protection.
The cost of tariffs is transferred from the US importer to the US consumer
Once an American importing company pays the tariff to the US Treasury, it can choose to absorb the cost or pass it all or some of it onto the buyer of its goods – whether that's a retailer or a consumer.
For instance, American shoe seller Deer Stags, which imports most of its product line from China, opted to combine both methods.
It was more difficult to get consumers to pay more for existing styles that Deer Stags had offered for a while, president Rick Muskat informed CNN. As a result, the company ended up covering the cost of the tariffs on some older styles and increasing the price on some new items.
There are numerous factors that can influence a retailer's decision to increase prices on some items and not others.
Some products affected by Trump's tariffs experienced "significant price increases," but overall, the impact of tariffs on retail prices "is more diverse," one study published in 2019 discovered.
"Somebody in the United States has to pay this tax," said Howard Gleckman, a senior fellow at the left-leaning Urban-Brookings Tax Policy Center.
"If it's not consumers, it's going to be companies. And if it's companies that pay it, ultimately, the cost will be borne, to some degree, by workers," he said.
Tariffs are intended to raise prices – and do
Although the full cost of the tariff may not be passed from the retailer to the consumer, there's widespread agreement among economists that some prices rise for consumers due to tariffs.
For example, the median price of washing machines in the US increased by about $86 – or nearly 12% – after Trump imposed tariffs on foreign-made ones, according to a study published in 2019. The researchers also discovered that the price of dryers – which were not impacted by tariffs – but are usually sold in conjunction with washing machines – also increased by 12%, or approximately $92 per unit.
Together, the price increases cost consumers more than $1.5 billion during the initial year the tariffs were in effect. The duties expired in 2023.
A study published by the US International Trade Commission last year confirmed that prices increased for consumers on both imported and domestically produced washing machines.
The bulletin Trump was obligated to submit to Congress in 2018 concerning washing machine tariffs suggested that these taxes would inspire merchants to boost their charges. The tariffs were implanted due to Whirlpool's accusation that South Korean and Mexican-made washing machines were being marketed in the U.S. at prices lower than their production cost.
In response to demands for evidence proving that Trump's proposed tariffs wouldn't escalate prices, his campaign directed CNN to a study conducted by Jeff Ferry, an economist at the Coalition for a Prosperous America – a group promoting American producers and manufacturers.
However, Ferry's study revealed a 3.26% price increase over a six-year period following the implementation of broad tariffs, as a one-time cost bump.
His examination considered the influence of tariffs combined with tax reductions financed by tariff income. In this scenario, Americans would experience decreased taxes and increased incomes, even with the rise in prices, according to his study.
Ferry informed CNN that conventional economic theory utilized by most economists to analyze tariff pricing underestimates potential benefits, such as an increase in domestic manufacturing and job creation, and he adjusted his model accordingly.
It's true that after Trump imposed tariffs on foreign steel, some American steel companies resumed operations and generated new jobs. Nevertheless, multiple studies – for instance, one from the Tax Foundation and another from the US-China Business Council – assert that overall, the U.S. economy lost jobs due to Trump's tariffs and the retaliatory tariffs other nations imposed on U.S. goods and agricultural products.
- Despite Trump's claims that tariffs are not a tax on Americans, economists argue that it is reasonable to refer to tariffs as a tax because they directly affect consumer prices.
- The cost of tariffs is ultimately transferred from the US importer to the US consumer, either through higher prices or reduced profits for companies.
