By Katie Lobosco, CNN
Washington (CNN) — Former President Donald Trump and Republican vice presidential nominee Sen. JD Vance continue to falsely describe how one of their major policy proposals, across-the-board tariffs, would work.
Trump has falsely, and repeatedly, claimed that China – not US importers – pay the tariff.
At a rally in Arizona in mid-August, he claimed that Vice President Kamala Harris, his Democratic opponent, is lying when she refers to his tariff plan as a “Trump tax.”
“She is a liar. She makes up crap … I am going to put tariffs on other countries coming into our country, and that has nothing to do with taxes to us. That is a tax on another country,” Trump said.
In September, he repeated the claim during an interview with Fox News: “It’s not a tax on the middle class. It’s a tax on another country.”
And he said again during a rally in Wisconsin Saturday that “it’s not going to be a cost to you, it’s going to be a cost to another country.”
Vance said in late August that as a result of tariffs Trump imposed during his presidency, “prices went down for American citizens.”
“They went up for the Chinese but they went down for our people,” Vance added.
But that’s not true.
Facts First: Trump and Vance’s claims about how tariffs work are false. A tariff is a tax that is paid by US businesses – not other countries – when a foreign-made good arrives at the American border. One of the intended goals of a tariff is to raise prices on foreign-made goods, and study after study show that the duties do drive up costs for Americans.
Tariffs are a tax
Here’s how tariffs work: When the US puts a tariff on an imported good, the cost of the tariff usually comes directly out of the bank account of an American buyer.
“It’s fair to call a tariff a tax because that’s exactly what it is,” said Erica York, a senior economist at the right-leaning Tax Foundation.
“There’s no way around it. It is a tax on people who buy things from foreign businesses,” she added.
Trump has said that if elected, he would impose tariffs of up to 20% on every foreign import coming into the US, as well as another tariff upward of 60% on all Chinese imports. He also said he would impose a “100% tariff” on countries that shift away from using the US dollar.
These duties would add to the tariffs he put on foreign steel and aluminum, washing machines, and many Chinese-made goods including baseball hats, luggage, bicycles, TVs and sneakers. President Joe Biden has left many of the Trump-era tariffs in place.
It’s possible that a foreign company chooses to pay the tariff or to lower its prices to stay competitive with US-made goods that aren’t impacted by the duty.
But study after study, including one from the federal government’s bipartisan US International Trade Commission, have found that Americans have borne almost the entire cost of Trump’s tariffs on Chinese products.
To date, Americans have paid more than $242 billion to the US Treasury for tariffs that Trump imposed on imported solar panels, steel and aluminum, and Chinese-made goods, according to US Customs and Border Protection.
Tariffs costs are passed from the US importer to the US consumer
Once an American importing company pays the tariff to the US Treasury, it can decide to eat the cost or pass all or some of it along to the buyer of its goods – whether that’s a retailer or a consumer.
For example, American shoe seller Deer Stags, which imports most of its product line from China, decided to do a little bit of both.
It was harder to get customers to pay more for existing styles that Deer Stags had carried for a long time, president Rick Muskat told CNN. So the company ended up eating the cost of the tariffs placed on some older styles and charging more for some new items.
There are many factors that can affect a retailer’s decision to raise prices on some items and not others.
Some goods affected by Trump’s tariffs saw “sharp price increases,” but overall, the tariffs’ impact on retail prices “is more mixed,” one study published in 2019 found.
“Somebody in the United States has to pay this tax,” said Howard Gleckman, a senior fellow at the left-leaning Urban-Brookings Tax Policy Center.
“If it’s not consumers, it’s going to be companies. And if it’s companies that pay it, ultimately, the cost is going to be borne, by some degree, by workers,” he said.
Tariffs are meant to raise prices – and do
Even though the full cost of the tariff may not be passed from the retailer to the consumer, there’s widespread consensus among economists that some prices do rise for consumers due to tariffs.
For example, the median price of washing machines in the US rose by about $86 – or nearly 12% – after Trump imposed tariffs on foreign-made ones, according to a study published in 2019. The researchers also found that the price of dryers – which were not impacted by tariffs – but are usually sold in a package with washing machines – also increased by 12%, or about $92 per unit.
Together, the price increases cost consumers more than $1.5 billion during the first year the tariffs were in place. The duties expired in 2023.
A US International Trade Commission study published last year confirmed that prices went up for consumers on both imported and domestically made washing machines.
One of the goals of using tariffs is to raise prices on foreign-made goods, making it easier for domestic producers to sell goods at a competitive price.
A report Trump was required to send to Congress in 2018 about the washing machine tariffs said that the duties would “provide an impetus for importers to increase their prices.” In fact, the tariffs were put in place in response to Whirlpool’s complaint that washing machines made in South Korea and Mexico were being sold in the US for less than they cost to produce.
When asked for proof that Trump’s proposed tariffs would not raise prices, his campaign pointed CNN to a study from Jeff Ferry, an economist at the Coalition for a Prosperous America – a group that advocates for US producers and manufacturers.
But Ferry’s study actually found that prices would rise by 3.26% over a six-year period following the implementation of the across-the-board tariffs, as a one-time price increase.
His analysis looked at the impact the tariffs would have when combined with tax cuts paid for with the tariff revenue. In that scenario, Americans would see lower taxes and higher incomes despite the increase in prices, according to his study.
Ferry told CNN that the traditional economic model used by most economists to analyze the price of tariffs downplays the positives that can happen – like an increase in domestic production and the creation of jobs – and that he adjusted his model accordingly.
It’s true that after Trump imposed tariffs on foreign-made steel, some American steel companies reopened mills and created new jobs. But several studies – like one from the Tax Foundation and another from the US-China Business Council – say that overall, the US economy lost jobs due to Trump’s tariffs and the retaliatory tariffs other countries put on US goods and agricultural products.
This story has been updated with additional information.
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