Thursday, June 25, 2020

White House (Sort of) Admits Tariffs Are Paid by Americans

By Eric Boehm - June 25, 2020 at 06:00AM

It took a pandemic for the White House to admit a basic economic reality: Tariffs on goods imported into the United States are paid by Americans. That's something that pretty much everyone outside of President Donald Trump and White House trade adviser Peter Navarro already knew. But for nearly two years—ever since Trump launched his trade wars in March 2018—the president and his defenders have stubbornly claimed, contra both theory and evidence, that the duties are absorbed by China and other exporters.

Despite that insistence, Trump on April 18 signed an executive order that will grant some American businesses a three-month deferral on paying tariffs. This will provide some "payment flexibility" for American importers facing "significant financial hardship" due to the COVID-19 outbreak and an ongoing economic shutdown, the administration said.

In its limited form, the new tariff policy is roughly akin to the administration's earlier move to defer the federal income tax filing deadline from April 15 to July 15: People and businesses will still have to pay, just not right now. Even still, Trump stubbornly refused to grant deferrals for certain industries. His executive order does not apply to the duties on steel, aluminum, and goods made in China that have been the centerpieces of Trump's trade war. In practice, the policy applies to about half of all tariffs charged to American importers.

That creates a new plot hole in the ever-evolving justifications for Trump's tariffs. If deferring some payments is a boon for American business, why not eliminate them all? Trump doesn't seriously believe that the tariffs he's imposed on steel, aluminum, and Chinese imports are magically not paid by Americans if the other tariffs are, does he?

"The burden on importers, according to this formulation—well, if logic's not your strong suit or you're just willfully ignorant—is caused by the [tariffs that predated the Trump administration] but not the China or steel tariffs," says Daniel J. Ikenson, a trade policy analyst at the Cato Institute.

It would be better to lift the tariffs entirely, or at least to grant deferrals for everyone. Instead, American businesses will have to fill out more forms asking for relief. In a statement announcing the shifting tariff policy, U.S. Customs and Border Protection said deferrals would be granted only to companies that can demonstrate significant economic hardship.

The Trump administration is finally admitting that Americans pay for tariffs, but it seems the White House remains, in the midst of a colossal economic crisis, committed to picking winners and losers.

from Reason Magazine Articles