Does imposing tariff on China's imports help Americans ?
Who is really paying the tariff ?
The mechanics of tariffs are not complicated: The government sends a tax bill to the company that brings goods into the country. Most of those tax bills go to American companies, often import firms that specialize in dealing with the customs process.
It doesn’t really matter who gets the bill, however. The important question is where the money to pay it comes from.
And in broad terms, there are only two options: It comes either from the firms that make, move and sell the products or from the pockets of the buyers.
Consider the case of washing machines. In January 2018, Mr. Trump imposed a tariff on washing machines, initially at a rate of 20 percent. The tariff caused a 12 percent increase in the price of washing machines,
according to a study by economists at the Federal Reserve and the University of Chicago. It also resulted in a similar increase in the price of dryers. Americans responded by buying more domestic washing machines, creating about 1,800 new jobs. But the cost of the tariffs was borne entirely by American consumers. The study estimated that each of those new jobs came at a cost of more than $815,000.
The Trump administration has tried to focus the China tariffs on the industrial supply chain: products used in making other goods, rather than products sold directly to consumers. That means much of the cost initially is absorbed by faceless corporations.
But the bottom line remains either lower profits or higher prices.
Some of the money could, in theory, be squeezed from Chinese manufacturers.
But a pair of recent studies by prominent academics, including the chief economist at the World Bank, have concluded that the full cost of the Trump tariffs is being paid here in the United States, although China has suffered a loss of access to the American market.
The cost of a tax is not just the money extracted from the private sector but also the disruption of economic activity. Here, too, the tariffs are proving painful.
The second study estimated that tariffs were extracting $3 billion a month from American companies and consumers — and causing an additional $1.4 billion a month in lost economic activity.
Mr. Trump’s tariffs also have prompted China to retaliate, and that is causing particular pain for Midwestern farmers who have lost a major market for their crops.
