Donald Trump celebrated his monomania this morning in a text boasting, “Billions of Dollars are pouring into the coffers of the U.S.A.” because of tariffs on the Chinese. Yes, tariffs do indeed go to the federal government, but who pays them? Trump and his zealots will claim it’s the exporter. But is it?

Let’s say the Chinese currently sell widgets in the US for $15 each. While US companies must sell them at $18 to make a profit. In response, Trump levies a tariff of $3 per widget. The Chinese could pass along the whole cost, making American widgets competitive. The US Treasury would benefit by collecting $3 for each Chinese widget sold.

But who’s paying the $3? Whoever is buying widgets — in this case, the American consumer. Increasing the price of widgets by $3 is the equivalent of adding a 20% sales tax. However, that revenue would only come from Chinese widget sales. The Treasury would get no direct benefit from increased American widget sales.

Ultimately, the treasury would receive some money from an increase in corporate tax collected. But let’s remember Trump slashed the corporate tax rate —  and businesses are very good at hiding profit.

Let’s say the Chinese decide to absorb $1 of the tariff. The American consumer would still pay $2 (13%) more for a widget. And American widgets would still be uncompetitively priced. The Treasury would still receive tariff revenue of $3 a widget, but the American consumer would pay 2/3rds of that.

Also consider this: Sales tax is a retrogressive tax which burdens the poor more than the rich — because the poor must spend a higher percentage of their income on stuff than the rich do.

It gets worse. the Treasury needs more money because of Trump’s tax cuts. So while the rich get theirs, the poor are paying more to ease the deficit burden. In other words, tariffs aren’t just a sales tax they also shift wealth from the poor to the rich.

Let’s look at one last scenario. Trump slaps a tariff of $5 on each widget and the Chinese can’t afford to pay it. Now the consumer is paying a 33% sales tax. And where is that money going? Not to the government to fund things the consumer needs, but straight to American corporations to be paid out in executive bonuses and stock buybacks. Again benefiting the rich at the expense of the average consumer.

But here corporate apologists will cry triumphantly ‘but what about all the extra jobs created by a rise in American widget sales?’, I grant you there will be an increase in US widget jobs. But the Chinese are not sitting on their hands. They are targeting American exporters. So jobs in those companies will decline.

And what of Trump’s claim that foreigners can just shift production to the US? It’s magical thinking. The Chinese are not about to shift jobs to the US. They will do as stated above, put tariffs on American goods. 

Lastly, if the aim of Trump’s policy is to increase jobs and reduce the trade deficit he should forget tariffs and instead subsidize the labor cost of American widget manufactures. Now the domestic widget makers can hire more people and price their widgets competitively. 

The advantage here is that employment goes up. The consumer doesn’t pay any more for widgets. And the Chinese are priced out of the US widget market. Just imagine not subsidizing fossil fuels but instead training miners to make widgets in plants run on clean power. Feels good, doesn’t it?

Free-market types will protest — but it will be meaningless. Tariffs are just as big an interference in the free-market as labor subsidies are.  

The disadvantage from Trump’s point of view is that US widget manufacturers won’t profit from it. And it will increase the deficit. But step two is electing a Democratic President and Congress so that America can have a tax code that creates a more equitable distribution of wealth.

In other words, we can see an increase in American production. An increase in employment. A fairer tax code. And a move away from a new Robber Baron age to an era of Eisenhower-style wealth distribution. And don’t conservative always extol 1950s values? 


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The Symphony of the Seas is the world’s largest cruise ship. It is 1,188 ft long, 215 wide and has a gross tonnage of 228,081. It can carry almost 9,000 passengers and crew. It cost $1.35 billion. But it is not the world’s most expensive ship. The most expensive is the aircraft carrier, USS Gerald Ford. This largest-ever naval ship is 1,106 […]

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The conservative echo chamber resonates with claims made about what liberals believe and stand for. As you might expect, there is no factual basis for what they say. Let’s analyze their top dozen mischaracterizations: 1. Liberals want open borders, where anyone, for any reason, can come to America at any time. Liberals do not believe […]

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The chart above tracks the growth of the average hourly wage of the American worker. It seems to show an overall steady and solid increase. But it is an optical illusion. The scale on the right starts at $22.00 and ends at $22.80. If it started at $0.00 the columns would appear to be about the […]

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The Two Americas – Rarely the Twain Shall Meet.

July 30, 2015

“History is written by the rich, and so the poor get blamed for everything” ― Jeffrey D. Sachs Martin Luther King talked of ‘two Americas’. Two Americas divided by wealth and opportunity. And it isn’t only that the rich can buy more stuff than the poor. They can also buy better criminal justice and political results. Rob […]

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July 29, 2015

“The essence of the independent mind lies not in what it thinks, but in how it thinks” ― Christopher Hitchens. Will an increase in the minimum wage lead to economic Armageddon and mass firings – or will it lift millions out of poverty? Many have an opinion and luckily there are ‘experts’ they can cite […]

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“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist” ― Dwight D. Eisenhower. Tom Kennedy, Wes Bush, and Greg Hayes are names not familiar to most Americans, but those government […]

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Are We Mom, the Flag, and Apple Pie – Or More Like the Guy at Applebee’s in the Wife Beater.

December 11, 2014

“America is great because she is good. If America ceases to be good, America will cease to be great.” ― Alexis de Tocqueville. We consider ourselves to be a decent people. Our heroes are stalwart sorts – who can be relied upon to the right thing. Cary Cooper, John Wayne and the Marlboro Man. We […]

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Capitalism’s Casualties – 6 Things That Are Stupidly Expensive in the US.

November 19, 2014

“If you want to know what God thinks of money, just look at the people he gave it to.” ― Dorothy Parker American capitalists tell us the magic of the US market is that it will always give us the best goods at the best value. The real magic is that people still believe it. […]

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