“To me, the most beautiful word in the dictionary is ‘tariffs’. – Donald Trump
“Lessons in life will be repeated until they are learned.” – Frank Sonnenberg
Tariffs are not paid by China. Tariffs are paid by American consumers. Hold that thought.
There remains a remarkable misunderstanding about tariffs and who pays them. A tariff or import duty is simply a tax on imported goods. It acts like a sales tax at the grocery store, a specified percentage that is added to the price at checkout. While former President Donald Trump consistently misrepresents that China pays tariffs to the U.S., this is untrue. Exporting countries do not pay import taxes, as we shall see. U.S. consumers pay tariffs in the form of higher prices and lower incomes.
Products imported into the U.S. that are not subject to free trade agreements are taxed at the point of entry. A company importing goods for sale in the U.S., for example a large retailer like Walmart, is required to fork over the applicable tariff to the U.S. Customs and Border Patrol at the port of entry, which is forwarded to the U.S. Treasury. The transaction has no impact on China or Chinese exports but simply increases Walmart’s cost.