Casually trotting out alternative facts — that is, embracing a delusion that is set apart (often quite far) from reality — has been such a common practice of President Donald Trump and his underlings over the past two years that one sometimes wonders: Are these cynical attempts to manipulate public opinion, or do they reflect some basic misunderstanding of policy or practice? We tend to assume the former but can’t wholly discount the latter. Such is the case with this week’s entry: Who pays tariffs?
One might assume that’s a pretty easy call, but there was President Trump on Twitter Thursday morning happily announcing that the United States has been collecting billions of dollars in tariffs “being charged to China,” which implies that Beijing is writing checks to the U.S. Treasury with each ton of steel, shipping container of sportswear or crate of auto parts it sends this direction. Unfortunately, that’s not how it works. Tariffs are like wholesale taxes paid by the buyer, so it’s automakers like General Motors and retailers like Walmart who are forking over the money to the Treasury. It’s then up to them to decide how much to pass along to consumers (usually most, if not all).
Making President Trump’s fundamental misrepresentation of import duties all the more remarkable is that he then brags about how they help reduce the deficit. And he’s done so many times. Back in August, he tweeted: “Because of Tariffs we will be able to start paying down large amounts of the $21 Trillion in debt that has been accumulated, much by the Obama Administration, while at the same time reducing taxes for our people.” Now, marvel at that statement. He’s bragging about a tax increase while bragging about a tax cut. Never mind that tens of billions of dollars in tariffs aren’t enough to make much more than a small dent in a budget deficit projected to reach $1 trillion in the current fiscal year.
So how does a Republican president get away with boasting about tariffs, which are just another form of taxes? Part of it may be that tariffs do, indeed, hurt the countries against which they are assessed. If goods made in China are made more expensive to U.S. consumers, they’ll probably buy less of them, and the Chinese will get stuck with a lot of excess inventory or shutter factories. In theory, those higher prices give an inside track on the domestic market to U.S.-based producers who don’t face that tariff burden.
But it also seems likely that the president benefits from average Americans having little idea what a tariff is. They never see that particular bill. They may notice higher prices, but how are Walmart shoppers to understand what role tariffs played in the price of auto parts used to fix their F-150? There’s a basic manipulation here that assumes that when Americans hear the words “China” and “tariffs,” they’ll just assume President Trump is putting the hurt on Xi Jinping and not on Uncle Joe, Aunt Jennifer or Cousin Mary. And, of course, it’s much worse than that. Higher prices and decreased consumer spending mean fewer jobs in the United States, too. Take General Motors layoffs, for example. That’s the reality of a complex and interconnected global economy: Hurt Chinese imports and we hurt our own economy, too. That’s a big reason why duties should always be the trade strategy of last resort.
But there is one bright side in all of this. President Trump has made the connection between increased taxes and paying down the deficit. There is actual truth there. If the U.S. is to reduce its debt, Mr. Trump and Congress are going to have to look for ways to bring more revenue into the Treasury. Tax cuts have the opposite effect. The Congressional Budget Office warned last April that the Trump tax cuts have expanded the deficit, which could reach 100 percent of the nation’s gross domestic product by 2028. Merely cutting back federal spending isn’t going to fix that problem — not in a budget where the biggest ticket items are “untouchable" mandates like Social Security and Medicare. So this week, let’s hold onto that silver lining of truth in the cloud bank of alternative facts hovering over the White House.