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Who pays for Donald Trump's tariffs?



U.S. President Donald Trump talks to reporters with Treasury Secretary Steven Mnuchin (L) and U.S. Trade Representative Robert Lighthizer (R) in the White House on March 8, 2018.

Chip Somodevilla | Getty Images

More than a year after U.S. Trump has on many occasions said the US Secretary of State Donald Trump said: "Donald Trump has come to the conclusion that he has not made a definite conclusion."

is collecting billions of dollars in tariffs from China. In fact, the president reiterated that over the weekend in a Twitter post, saying that "China is paying a heavy cost in that they will subsidize goods to keep them coming, devalue their currency."

But Trump's claim has been disputed By many American businesses that import Chinese goods, which argue they are the ones bearing.

According to economists, both sides could be right.

Footing the bill

When Chinese goods arrive in America, importers ̵

1; which are generally American but can also be US registered entities of foreign firms.

But trumps could be right in that, eventually, it may be the Chinese that pay for the consequences of those tariffs, economists said. China would slash the prices they would charge their American customers. Effectively, that situation would mean the Chinese companies are paying for the levies going into U.S. government coffers.

The Economist Intelligence.

More often than not, the "real pain" of "The Economics of Human Rights." Unit.

Trump's tariffs – from the manufacturer and exporter in China, to importer and consumer in the US – wants to bear some burden. And economists are increasingly focusing their research on how to get rid of these goods in China.

Baptist wrote in a May note.

He explained that, generally, if China is the only supplier for a product, "more (or all) of the tariff is passed on to US consumers, and the pain is felt by the latter." But in the event that China is just one of the many countries that sell a product, "the pain is felt mostly by Chinese producers."

"So, the answer so carefully, "Baptist wrote.

What do you know so far?

An expanding body of research has found that the burden of tariffs has been mostly fall on the US

One of the latest papers published on the topic is by economics researchers from the International Monetary Fund, Harvard University, University of Chicago and the Federal Reserve Bank of Boston. Using price data collected at the U.S. borders and at retailers, the researchers found "nearly complete pass through tariffs" to America.

[19659002andearnlowerprofitmarginsfromproductsimpactedbyTrump'stariffs

Simon Baptist

19659002] economist, The Economist Intelligence Unit

Other studies, though, suggest that consumer prices have gone up in the US as a result of higher levies. One such paper, focusing on washing machines, was published in April by researchers from the Federal Reserve and the University of Chicago. Washers were among the earliest products targeted by the Trump administration, with tariffs from 20% to 50% of the total imported large scale living washing machines, regardless of their countries of origin.

nearly 12% jump in the price of washers – both imported and domestically produced – in the immediate four to eight months after the implementation of the new levies.

William Reinsch, Senior Advisor and Scholl Chair of International Business at Think Tank Center for Strategic and International Studies, said: cited that particular study in April commentary on the impact of tariffs.

On this the price of washers made it possible to get away with it in the US thus, it has gone up even though they're not subject to tariffs, "Reinsch said that phenomenon" – the central point of protection – to allow domestic producers to make money and make more money. "

Not all products want to react to the same thing. The full cost.

The Trump administration in 2018 found that consumers are bearing the full cost.

"We are that the US rates were almost completely passed through in foreign countries, so that the entire incidence of the tariffs fell on domestic consumers and importers up to now, with no impact so far on the prices received by foreign exporter "Researchers from the Federal Reserve Bank of New York at Columbia University and Princeton University

real income of $ 1.4 billion per month by the end of last year, the researchers said.

Inflation rate has been relatively stable, according to the Bureau of Labor Statistics' Consumer Price Index.

Mary Daly, president and chief executive of the Federal Reserve Bank of San Francisco, said the inflation has not been ticked up. " Firms are not passing away. Instead, they appear to have been universally confirmed.

In fact, some research indicates that Chinese exporters may be the ones paying the toll. European economists Benedikt Zoller-Rydzek and Gabriel Felbermayr argued in a November 2018 paper that "75% of the tariff burden."

4.5% rise in the price that US consumers pay for Chinese products by 20.5%.

Who really loses – the US or China?

overall economic cost of tariffs. Economists thus take the account in the long run. That's more and more important for economic growth.

Generally, the economists predicted that the Chinese economy – instead of the U.S. – wants to experience a larger hit from Trump's tariffs. China has more to loose because of its greater reliance on exports.

Oxford Economics said in a May report that, if the U.S. and China impose elevated tariffs on all commodity trade, the American economy in 2020 is estimated to grow by 0.5 percentage points less than a no-tariff scenario. Meanwhile, China's economic setback is expected to be 1.3 percentage points, the report said.

Yangshan Deepwater Container Port, Shanghai, China.

Qilai Shen | Corbis Historical | Getty Images

One way that China has felt the pinch is through a loss of demand for its products, Oxford Economics said. The company explained that based on American trade data. imports of Chinese goods subject to 25% tariffs are estimated to have fallen by 50%.

Adam Slater, lead economist at Oxford Economics, says: "The cost is becoming visible visible." wrote in a May report.

But higher prices paid by US Stefan Legge, an economics researcher and lecturer at the University of St Gallen in Switzerland.

Legge told CNBC.

The problems with the US economy are not the same as those of the US economy

From a pure economic point of view, because of the many potential negative side effects, said Legge , But the US-China trade has gone beyond economic considerations, according to Washington. The White House economic advisor Larry Kudlow admitted as much. In a contradiction to Trump, Kudlow acknowledged that both the U.S. and China "want to suffer" in the trade, but he argued that it's a risk "we should and can not take care of our economy in any appreciable way."


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