Washington Insider: Who Pays Tariffs?

There is a strange back and forth over tariffs these days, Bloomberg says, and it concerns whether or not China pays for tariffs on goods it sells in the United States. According to data from U.S. Customs and Border Protection (CBP), more than $13 billion in duties imposed by the Trump administration were assessed on imported goods as of Dec. 18. Actual collections could lag and be lower because of refunds and other factors, but Treasury Department reports show receipts from all customs duties have risen sharply since the new tariffs took effect. And, while administration officials have suggested on Twitter and in public comments that tariffs are “somehow being charged to or paid by China and other countries, trade economists say that’s generally misleading.” U.S. importers of record are responsible for the duties and ultimately U.S. businesses and consumers pay through higher costs, they say. Nevertheless, the president and his administration have continued to suggest that the tariffs are “bringing in lots of new revenue and all of the burden is falling on the Chinese," said Phil Levy, senior fellow on the global economy at the Chicago Council on Global Affairs and a former senior economist for trade for President George W. Bush’s Council of Economic Advisers. “I think that’s mostly false." Johns Hopkins University applied economics professor Steve Hanke, a member of the Council of Economic Advisers under President Ronald Reagan, put it more bluntly. “Tariffs on Chinese imports are paid by Americans, not by the Chinese or their government. The President’s tariffs are simply a tax on American consumers," Hanke said recently. The administration imposed tariffs starting last January on foreign-made solar equipment and washing machines, then levied duties on steel and aluminum imports from March on the grounds of national security. It has slapped duties on about $250 billion in Chinese goods in response to a U.S. trade deficit and allegations of intellectual property theft and other unfair trade practices. Customs and Border Protection collects the tariffs based on the price paid for products and the tariff rate in effect and the duties are charged when shipments are released into the U.S. The assessed amount now tops $13 billion, with $8 billion coming from the duties on Chinese goods, CBP data show. The duties are deposited in the U.S. Treasury. Customs duties increased by $8 billion in the final three months of 2018, an 83% gain from the year-ago period thanks in large part to recent increases in administration tariffs, according to estimates from the non-partisan Congressional Budget Office. Administration officials have suggested the U.S. is benefiting without paying—for example, on Jan. 3 a White House tweet said that “the United States Treasury has taken in MANY billions of dollars from the Tariffs we are charging China and other countries that have not treated us fairly.” A day later the President told reporters that “we’ve taken in billions and billions of dollars in tariffs from China and from others." It’s not foreign governments paying, said Dan Anthony, vice president of The Trade Partnership, an economic consulting firm. U.S. businesses paid $2.8 billion in new Trump tariffs in October alone, The Trade Partnership determined in an analysis for Tariffs Hurt the Heartland, a coalition of business and agricultural groups lobbying against recent administration duties. Companies aren’t equivocating about the cost. Ford Motor Co. executives, speaking during the recent Deutsche Bank Global Automotive Conference in Detroit said they see a $700 million headwind from duties this year. General Motors Co. said late last year that tariffs on steel and aluminum had already cost it $1 billion. “Let me be very clear: Tariffs are taxes paid by American families and American businesses – not by foreigners," Thomas Donohue, president of the U.S. Chamber of Commerce, said in his annual state of American business address last week. This is a strange debate in that it is coming long after the policies have been imposed. Tariffs are widely seen as special taxes imposed on imports with impacts similar to other taxes — they raise the eventual cost of the product, and typically dampen demand and sales and shift competitive positions among competing sellers and buyers. Both sides are deeply dug in on this trade fight and each is busily pointing out damaging impacts on the other. Businesses, including those with global markets are increasingly worried that the overall impact will be large and negative—and possibly more persistent than many now believe. This certainly is a fight producers should watch closely as it intensifies, Washington Insider believes.