Trump Tariffs and Trade War

What is tariff?

Here's a great explanation and how it'll impact our clients (companies) and consumers like us, written by Howard Gleckman at Tax Policy Center.

"A tariff is a tax on imported goods. Despite what the President says, it is almost always paid directly by the importer (usually a domestic firm), and never by the exporting country."

List of news articles on trade tariffs

July 2, 2019 WPR

- Why Vietnam Looks Like the Next Target of Trump’s Tariffs

July 1, 2019 New Yorker Magazine & The Guardian

- Trump Administration Proposes $4 Billion in Additional Tariffs on European Union

June 25, 2019 The Hill

- Consumer Confidence fell in June amid Trump tariff threats

June 30, 2019 CBS News

- Trump suspends new tariffs, U.S. and China to restart trade talks

- Mr. Trump said existing U.S. tariffs would remain in place against Chinese imports while negotiations continue, but additional tariffs he's threatened to slap on other Chinese goods will not go forward for the "time being." 

June 28, 2019 REUTERS

- U.S. will not level new tariffs on Chinese exports: Xinhua

June 25, 2019 The Verge

- Trump's Tariffs are aimed at China, but Apple is in the line of fire.

June 17, 2019 POLITICO

- Companies plead with Trump against new China tariffs.

Hundreds of representatives of companies and trade groups are warning President Donald Trump that carrying out his plan to impose tariffs on $300 billion more in Chinese imports will hurt consumers’ pocketbooks, hamper business growth and fail to achieve the president’s objectives.

“It’ll be the straw that breaks the camel‘s back for a lot of our companies," said Karen Giberson, president and CEO of the Accessories Council, an industry group whose members include fashion designers, jewelry importers and the upscale retailer Bloomingdale's.

June 10, 2019 New York Times

- Trump Says Mexico Tariffs Worked, Emboldening Trade Fight With China

"A tariff is a tax on imported goods. Despite what the President says, it is almost always paid directly by the importer (usually a domestic firm), and never by the exporting country."

Who actually pays the tariff?

"The answer, I am sorry to say is, it depends.

A business will, if it can, pass its higher after-tax costs on to consumers. Thus, the price of Chinese TVs sold in the US may rise rapidly.

But the firms selling those TVs eventually will face competition from companies that sell lower-cost TVs made in a third country that is not subject to the import tax. In that case, some of the tax may be paid by the firm’s shareholders in the form of lower profits or by its workers in the form of lower compensation.

Or, the firm may switch to a non-Chinese supplier and, in effect, nobody will pay the tariff.

Adam Smith explains.

In the short run, higher prices for imported goods will reduce consumption of those goods. But in the longer term, the decline in competition from foreign products makes domestic firms less efficient. And less competition will result in higher prices, not just for those goods subject to the tariff but for competing goods that are not—such as those made domestically. In the case of Trump’s tariffs on China, that means US consumers will pay somewhat higher prices. Thus, not only will the price of Chinese TVs rise, but so will the price of Mexican TVs and US-made TVs.

In the case of Trump’s tariffs, US prices will rise but not by much and US demand will decline but not by much. Chinese exports to the US will fall but most likely be replaced by imports from producers of competing products in other countries.  

Will Trump’s new tariffs generate a big boost in federal revenue?

The short answer is: No.  

There may be other fiscal effects for the US, however. A substantial decline in Chinese exports to the US will drive down the value of the Chinese currency. That will offset some of the after-tax price of Chinese-made goods in the US. But any lost exports still mean China will collect fewer US dollars and thus buy fewer Treasury securities. That, in turn, will tend to drive up interest rates in the US.

So at the margin at least, taxing imports will drive up prices for US consumers and eventually may raise borrowing costs. Future effects are hard to predict, but no, Mr. President, China is not paying the US billions of dollars in tariffs. Not any more than Mexico is paying for that wall."

For complete journal, visit Tax Policy Center link here: https://www.taxpolicycenter.org/taxvox/what-tariff-and-who-pays-it