Trump’s trade tariffs are really a tax on his base
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So, how’s Trump doing?
Awful. Trade deficits are growing on his watch.
The overall trade
deficit in September was 21% larger than during his first full month in office.
In 2016, under President
Barack Obama, America imported $502.9 billion more in goods
and services than it sold in exports.
In 2018, under Trump,
that ballooned to $627.7 billion,
an increase of $124.7 billion, and the deficit is on pace to run even deeper in
2019. For the nine months ending in September, the overall trade deficit was
$481.3 billion, up $24.8 billion for the same period of 2018.
Trump’s tariffs are a
tax on Americans, paid by companies who import goods and then either passed on
to consumers or absorbed as reduced profits.
Trump always rails about the trade in goods, ignoring services such as accounting, banking, and insurance. Our deficit in goods traded with China grew through last year. Indeed, the 2018 deficit of $419.5 billion was the largest on record, up a whopping 21% over the $346.8 billion of Obama’s last calendar year as president. So far, 2019 looks like it will come in around $360 billion.
The deficit with China
is smaller not because Trump’s policies haven’t so much altered the balance of
trade as shrunk the volume of trade. That, in turn, means fewer jobs for
Americans, close to 11 million of whom,
the Commerce Department estimates, owe their jobs to trade with China.
Mexico,
Too
And what of Mexico,
another Trump trade bugaboo? In 2016, Obama’s last year, our trade deficit in
goods was $63.3 billion. That rose to $80.7 billion in 2018. That’s a 27%
increase under Trump.
In just the first nine
months of this year, our Mexico goods deficit was $76.1 billion, meaning this
year will easily set a new record deficit.
Trump’s disregard for
trade in services is a most curious omission for a man who boasts, falsely,
that he has an economics degree from Penn’s famous Wharton School of Finance.
His degree, for which he mostly did independent studies while working for his father,
is from a one-professor real estate department at Penn that was under Wharton,
which is a graduate school.
Equally troubling is
Trump’s mistaken belief that China and Mexico pay the tariffs he has placed on
their goods.
Trump’s tariffs are not
paid by China. Tariffs are a tax on Americans, paid by companies who import
goods and then either passed on to consumers or absorbed as reduced profits.
The Treasury Department, by the way, calls them “customs duties.”
Americans
Pay the Price
So far, Trump has spent
$28 billion of your tax money in bailout money for soybean and other Midwest
farmers whose major market he decimated with his anti-China trade policies. The
damage may last years or decades because China switched to other countries for
soybeans, promising to buy up to $50 billion a year from Brazil.
Think of that as a Trump “Put Brazilian Farmers First” policy.
During a Sept. 4 news conference on Hurricane Dorian, the one that he falsely said would hit Alabama, Trump veered off into China trade with assertions that were just as false:
“We have a lot of—we’ve
taken in tens of billions of dollars in tariffs from China. Prices have
not gone up, or they’ve gone up very little. China has paid for most of
that, and I say paid for all of it. China has now had the worst year that
they’ve had in 57 years. This is the worst year they’ve had in 57
years. And they want to make a deal; we’ll see what happens.”
That was such nonsense
that anyone who knows their Chinese history laughed. In 1962 China was a poor
farm country with minimal industry. It was still under Mao, whose policies
resulted in mass starvation that some historians estimate at 45 million people
dying.
What is fact is that the
spectacular growth of the Chinese economy
has slowed to its lowest level in the last three decades.
Tariffs
Wipe Out Income Tax Cuts
The Trump tariffs pretty
much wipe out the modest income tax savings that went to the bottom 90% of
Americans under the Trump/Radical Republican tax cut law enacted in December
2017. Most of its savings went to corporations and the top 1%.
So, while Trump has
tricked millions of Americans into believing he cut their tax burdens, he has
actually raised their total burden with his tariffs.
Trump’s tariffs are also
slowing economic growth and in time will mean 512,000 fewer jobs than if the
tariffs had never been imposed, Tax Foundation has noted.
Analysis by Trade Partnership, a
consulting firm, asserted that the “biggest winners from tariffs on Chinese
cell phones are other foreign producers. Manufacturers in Korea and Vietnam
would see annual export revenues grow by about $1.8 billion and $1.2 billion,
respectively. American consumers, on the other hand, would pay over $8.1
billion more for cell phones.”
Prices of laptops, video
games and toy drones are also expected to rise significantly, costing American
consumers billions more for those who do buy. The study predicted a 35% drop in
laptop purchases.
Because there is
virtually no laptop manufacturing in the United States, “American consumers
would pay $785 in new out of pocket expenses for each $1 in new revenue for
American manufacturers,” Trade Partnership estimated.
Remember that as an
example of Trump’s ignorance of trade benefits.