President Trump on Friday placed significant taxes on American consumers, effectively invited Chinese retaliation against American exporters, and weakened China’s economy in a way which in turn will reduce American and worldwide economic growth. Then Trump had the ignorance or chutzpah, or both, to tweet that “tariffs will make our country much stronger” and, truly bizarrely, that “tariffs will bring in FAR MORE wealth to our Country.”
Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch! In the meantime, China should not renegotiate deals with the U.S. at the last minute. This is not the Obama Administration, or the Administration of Sleepy Joe, who let China get away with “murder!”
— Donald J. Trump (@realDonaldTrump) May 10, 2019
The president continues to peddle what is incontrovertibly a falsehood, namely that tariffs bring Chinese money into the U.S. Treasury. That’s not how tariffs work. A tariff is a tax paid directly by American importers, not by Chinese exporters. To the extent (almost entirely) that the costs of those tariffs are added to the retail price of those goods sold in the United States, then American retail consumers pay higher prices.
Every time Trump bangs the tariff war drums, the stock markets tank. Yet Trump refuses to learn. Since he announced on Sunday that he would impose more than $200 billion in new tariffs on Chinese goods, the Dow Jones Industrial Average is down roughly 700 points — more than 2.5%, which in just five days is quite substantial.
Washington Examiner Business Editor James Langford did a great job bringing those costs down to a human level today, describing how a non-profit called Cribs for Kids struggles every time Trump raises these import taxes.
The hospitals, fire departments, and police departments that bought the cribs to distribute to needy parents had taken President Trump at his word that China was paying the duties. They were caught off guard by the reality that U.S. businesses, including nonprofits, had to do so, with the bill due when their goods arrived at port.
Multiply that story by tens of thousands of American businesses, and their tens of millions of consumers, and one gets a true picture of why the financial markets balk every time Trump acts like this.
What’s worse is that punishing China ends up punishing the United States down the line as well. The world’s economies are not separate, self-contained entities. They are all interrelated. It’s not a zero-sum game. If one nation’s economy falters, it doesn’t mean another’s economy gains to the same extent. Instead, if a major nation’s economy stumbles, it pulls down the entire world economy, including the U.S. economy, with it.
If Chinese growth slows, American growth slows. The markets know this. Why doesn’t our president?
