President Donald Trump’s top economic advisor has acknowledged that American businesses will foot the bill for the impending tariff war with China.
During an interview on Fox News Sunday, host Chris Wallace pressed Larry Kudlow on the issue of new tariffs on Chinese goods saying, “It’s not China that pays the tariffs, it’s the American importers, the American companies that pay what, is in fact, a tax increase.”
“Fair enough,” responded Kudlow, adding “both sides will pay in these things.”
CHRIS WALLACE: Trump keep saying China pays the tariffs he’s imposed. That’s not true. American importers do, right?
LARRY KUDLOW: Both sides pay.
CW: The Chinese aren’t paying!
LK: No, but they’ll suffer GDP losses.
CW: But Trump says China pays.
LK: Both sides will suffer. pic.twitter.com/eHcxHmBLoX
— Aaron Rupar (@atrupar) May 12, 2019
Kudlow then went on to argue that China will suffer most because “the Chinese will suffer GDP losses and so forth with respect to a diminishing export market.”
However, research shows that when tariffs are imposed, U.S. consumers pay the costs, as sticker prices go up on consumer goods; Chinese exporters rarely lower their prices to absorb the cost of tariffs, and U.S. distributors instead raise their prices to cover the costs, passing those costs on to American consumers.
Last week, Trump increased the taxes on $200 billion worth of imported Chinese goods from 10% to 25% and began the process to impose tariffs on remaining imports from China, totaling approximately $300 billion worth of goods.
Farmers are expected to be hit hardest by the tariffs, and Kudlow has vowed to seek out more aid for them if needed.
“I think we had an authorization of $12 billion,” Kudlow said. “We will do it again if we have to.”
According to Kudlow, tariffs against China are needed to correct past “unfair, nonreciprocal, unbalanced, in many cases unlawful” trade relationships with the country.
“The United States’ economy is in a boom, the numbers are coming in terrific — better than anybody expected on growth, on jobs, on unemployment, on wages, on productivity. We are in terrific shape,” said Kudlow. “In order to correct 20-years-plus of unfair trading practices with China, as I said, unlawful trading practices, I think this is a risk we should and can take without damaging our economy”
A March study by economists from the Federal Reserve Bank of New York, Princeton University and Columbia University concluded that yes, the tariffs are costing billions — but China won’t be paying.
“Our results imply that the tariff revenue the U.S. is now collecting is insufficient to compensate the losses being born by the consumers of imports,” the economists write in the study.
Trump and Chinese President Xi Jinping are expected to talk about tariffs in person at the G-20 summit in Japan next month.