Trump Keeps Saying China Is Paying Tariffs, Shows He Doesn’t Understand Tariffs

President Donald Trump claimed yet again that China is paying tariffs to the United States. During his trip to South Korea during the G20 summit, Trump made the claim, as he often has, that the tariffs he’s imposed on China are being paid by China.

“We’re winning and we’re winning big because we have created an economy that is second to none,” Trump told a press conference in South Korea. Trade talks between the two countries are reportedly back on after months of tensions and false starts.

“We’re collecting 25 percent on $250 billion, and China is paying for it, as you know, because, as you notice, our inflation hasn’t gone up,” Trump said.

The President once again betrays a fundamental misunderstanding of how tariffs work. Tariffs on trade are always paid by the country that imposes the tariff. In this case, the cost of the tariffs has been passed on to American consumers.

While tariffs might lead to China doing less business in the US, the immediate effect is to make many products more expensive for the American consumer. Trump seems to think that the Chinese government is handing over cash to the US. It’s also not clear why inflation proves this.

Trump’s lack of understanding on a basic issue of trade policy is worrying in a president who favors the use of tariffs as a way to leverage what he sees as economic opponents. He also fails to acknowledge that tariffs work both ways – particularly when dealing with the EU, the world’s largest trading bloc.

The President’s embrace of tariffs defies decades of Republican orthodoxy on trade. The GOP has long opposed tariffs as a tax on American consumers.