President Trump Still Doesn’t Understand Tariffs, No Matter How Many He Slaps On China

In a long tweetstorm Friday morning, President Trump ranted against the trade imbalance with China and showed his ignorance of how tariffs work. Again. Because no matter how many times this has likely been explained to him, he still doesn’t believe it.

Talks with China continue in a very congenial manner – there is absolutely no need to rush – as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S….

— Donald J. Trump (@realDonaldTrump) May 10, 2019

Tariffs do not go to the United States Treasury. Consumers in the U.S. pay the tariffs, in the form of higher prices on both raw materials and imported goods. For example, a tariff Trump slapped on washing machines in 2018 wound up costing consumers in the U.S. about $1.5 billion a year, or an extra $86 per washer and $92 per dryer.

Even if Trump left imported washing machines alone, a manufacturer in the U.S. might be paying a tariff on imported Chinese steel used to make them. So that would also jack up the costs passed to consumers.

Trump went on to claim that his new tariffs on China, which are being slapped on as a result of the U.S. failing to negotiate a new trade agreement with that country, will add $100 billion to the Treasury. He cites no source for this claim. He then goes on to claim this windfall can be redistributed somehow in a show of magnanimity by the government:

….If we bought 15 Billion Dollars of Agriculture from our Farmers, far more than China buys now, we would have more than 85 Billion Dollars left over for new Infrastructure, Healthcare, or anything else. China would greatly slow down, and we would automatically speed up!

— Donald J. Trump (@realDonaldTrump) May 10, 2019

Trump’s budget requests to Congress have contained massive cuts to nearly every government program except the military. So the idea his administration is going to turn around and put this alleged windfall (which is really not very much of a windfall in the context of the federal government’s nearly $4 trillion budget) is laughable.

No wonder Trump lost a billion dollars in a decade of running his own businesses.