- President Donald Trump repeatedly makes misleading and false claims about trade.
- Some of the top falsehoods portray trade as a zero-sum game and seek to minimise perceived costs.
- Trump says China pays US tariffs, for example, but there is a strong consensus that businesses and consumers bear the costs.
The Trump administration has raised valid concerns in its economic war with China, including what officials have found to be a system that allows intellectual-property theft and unfair state subsidies to companies.
Yet when it comes to trade, President Donald Trump has been repeating falsehoods left and right. Here are some of the most popular ones.
China pays US tariffs
Trump repeats this false claim often, saying that foreign exporters pay tariffs levied by the US.
“Billions of Dollars are pouring into the coffers of the U.S.A. because of the Tariffs being charged to China, and there is a long way to go,” he wrote on Twitter in November. “If companies don’t want to pay Tariffs, build in the U.S.A. Otherwise, lets just make our Country richer than ever before!”
However, study after study has found that businesses and consumers bear the cost. Tariffs cost Americans about $US1.4 billion per month in 2018, according to a recent paper by economists at Columbia, Princeton, and the Federal Reserve Bank of New York.
Trade imbalances signal a weak economy
Trump views the trade balance as a zero-sum scorecard of sorts, arguing that a deficit means the US is losing to China. As a candidate in 2016, he called the US-China trade deficit “the greatest theft in the history of the world.”
The figure is driven by many factors, however, including foreign-exchange rates, the amount a country borrows from abroad, and economic policies at home.
The trade deficit the US holds with other countries widened to its highest level in a decade in 2018, partly because of a $US1.5 trillion tax cut package that took effect that year. The deficit-funded package created more demand for imports, while a strong dollar weighed on exports.
Tariffs make the US richer
“Tariffs will bring in FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do,”Trump wrote on Twitter last week.
Nope. Tariffs create market distortions and can lead to retaliatory measures, causing deadweight losses. They also cast a cloud of uncertainty onto businesses and consumers, who might then delay investment and spending.
And remember, research suggests revenue from duties ultimately comes from American businesses and consumers.
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