AP FACT CHECK: Trump’s fallacious tariff tale
Burden of tariffs on imports from China and other countries falls entirely on US consumers and businesses.
WASHINGTON — In escalating his trade war, President Donald Trump is persisting in his deceptive argument that tariffs are a pure win for the US and a loss for China. He will not acknowledge that the costs of tariffs are being borne by Americans.
Trump has vowed to impose a blanket tariff of 25% on everything Americans buy from China. That would mean raising tariffs from 10% on $200 billion worth of goods by the end of the week and hitting an additional US$325 billion in Chinese products with the same penalty “shortly.” His skewed explanation of how tariffs work – a staple of his rhetoric – unfolded over Twitter, where he also spread a false assertion about hurricane aid to Puerto Rico.
TRUMP: “For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results.” – tweet May 5.
THE FACTS: This notion of a transfer of wealth from China to the US isn’t happening.
The burden of Trump’s tariffs on imports from China and other countries falls entirely on US consumers and businesses that buy imports, says a study in March by economists from the Federal Reserve Bank of New York, Columbia University and Princeton University. By the end of last year, the study found, the public and US companies were paying $3 billion a month in higher taxes and absorbing $1.4 billion a month in lost efficiency.
Money from tariffs is going into the federal treasury, but it’s mostly – if not entirely – coming from US businesses and consumers, not China, and it’s not a driver of economic growth but rather a risk to it. That’s why the stock market dropped May 6.
A coalition of US trade organizations representing retail businesses, tech, manufacturing and agriculture sharply disputed Trump’s statement. “For 10 months, Americans have been paying the full cost of the trade war, not China,” it said. “To be clear, tariffs are taxes that Americans pay, and this sudden increase with little notice will only punish US farmers, businesses and consumers.”
Trump invariably describes the US trade deficit as money “lost” to other countries, an equation that ignores the value to Americans of what they’ve bought. “We’ve lost so much money with China,” he told an audience in March. “We lose with everybody, almost.” People are no more losing money than when they buy groceries – rather they’re spending it and getting food.
He’s now making the converse case that a tax on imports, paid by Americans, somehow enriches them.
TRUMP: “Puerto Rico has been given more money by Congress for Hurricane Disaster Relief, 91 Billion Dollars, than any State in the history of the US.” – tweet May 6.
THE FACTS: That’s not true. The money that Congress has allocated to Puerto Rico for hurricane relief so far is nowhere close to $91 billion.
According to the White House, Trump’s $91 billion estimate includes about $50 billion in expected future disaster disbursements that could span decades, along with $41 billion already approved. Actual aid to Puerto Rico has flowed more slowly from federal coffers, about $11 billion so far.
The expected $50 billion in additional money is speculative. It is based on Puerto Rico’s eligibility for federal emergency disaster funds for years ahead, involving calamities that haven’t happened.
That money would require future appropriations by Congress.
The White House’s $91 billion figure for Puerto Rico, even if correct, would not be the most ever provided for hurricane rebuilding efforts. Hurricane Katrina in 2005 cost the US government more than $120 billion – the bulk of it going to Louisiana.