During an interview on Fox News Sunday, White House economic adviser Larry Kudlow admitted that the American people, and not Chinese exporters, would be paying directly for the tariffs imposed by President Donald Trump. He argued that the effects that the Chinese would feel from the tariffs would be long term, due to a diminished gross domestic product.
What's the background?
While promoting his policy of enacting steep tariffs to force China (as well as other nations) to agree to his preferred trade deals, President Donald Trump has repeatedly insisted that it will be China, not the United States, who will foot the bill for these policies.
On Friday, Trump tweeted that tariffs would bring in "FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do." He also promised to use "the over 100 Billion Dollars in Tariffs that we take in" to buy "agricultural products from our great farmers."
Tariffs will bring in FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, muc… https://t.co/fmxFehCNe3— Donald J. Trump (@Donald J. Trump) 1557488776.0
What did Kudlow say?
However, Kudlow indicated the tariffs themselves are paid by American importers who receive the products. "Fox News Sunday" host Chris Wallace pressed Kudlow about this apparent contradiction on Sunday.
"It's not China that pays tariffs," Wallace challenged Kudlow. "It's the American importers, the American companies, that pay what in effect is a tax increase and oftentimes passes it on to U.S. consumers."
"Fair enough," Kudlow responded. "In fact, both sides will pay. Both sides will pay in these things. And, of course, it depends —"
"If it's a tariff on goods coming into the country, the Chinese aren't paying," Wallace said.
"No, but the Chinese will suffer GDP losses and so forth, with respect to a diminishing export market, and goods that they may need for their own functioning economy," Kudlow said.
"I understand that, but the president says China doesn't — that China pays the tariffs. They may suffer consequences, but it's U.S. businesses and U.S. consumers who pay, correct?" Wallace asked.
"Yes, to some extent. I don't disagree with that," Kudlow admitted. "Again, both sides, both sides will suffer on this."
Chris talks to @larry_kudlow about who actually pays the tariffs with China if they were to be imposed #FNS https://t.co/cwl89OyLDK— FoxNewsSunday (@FoxNewsSunday) 1557667791.0
How did Trump respond?
Trump publicly disagreed with Kudlow on Monday, although he did not call him out by name, when he tweeted that there was "no reason for the U.S. Consumer to pay the Tariffs" on imports from China. He claimed that it had been "proven recently" that out of the 25 percent increase, "only 4 points were paid by the U.S." while "21 points" were paid by China." He also said that the U.S. would be taking in "Tens of Billions of Dollars in Tariffs from China."
We are right where we want to be with China. Remember, they broke the deal with us & tried to renegotiate. We will… https://t.co/YjUxHWGvx3— Donald J. Trump (@Donald J. Trump) 1557695165.0
Scott Lincicome, an international trade attorney who works for the libertarian CATO Institute, said that this analysis was based on a "hypothetical" examination, and that "2 rigorous academic examinations" had shown that the cost of these tariffs rested with American consumers.
"proven recently" - a November 2018 EconPol *hypothetical* examination (using old elasticities) Since then: 2 rigo… https://t.co/wHSpbuAgWz— Scott Lincicome (@Scott Lincicome) 1557748379.0
This cost is in addition to a decrease in the amount of exports that American producers face due to the impact of Chinese counter tariffs. On Monday, China announced that it would be raising tariffs on $60 billion worth of imports from the United States.