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Tag: inflation
Don't Expect Foreign Nations To Pay Trump's Tariffs (They're Still A Tax On You)

Don't Expect Foreign Nations To Pay Trump's Tariffs (They're Still A Tax On You)

As we all know, Donald Trump likes to play the tough guy. Unfortunately, he often does it in really foolish ways, and this time I’m not talking about his war against Iran.

I’m talking about Trump’s tariffs. From the way he talks, he seems to think that foreign countries are sending us checks equal to the tariffs he has imposed on U.S. imports from them. Donald Trump’s mind can be a scary place, so it’s not worth trying to tease out his thought process, except to point out that the idea that foreigners are sending us checks is absurd.

The tariffs are collected here when the goods show up at a customs office. The party paying the tariff most immediately is the importer. The importer could be a wholesaler who may resell it to a retail store, manufacturer, or other business. Or in many cases, it will be a larger retailer like Amazon or Walmart, who arrange for the imports directly.

Either way, it is someone at this end who is most immediately out the money for the tariff. Some of what they pay will be passed on to their customers. To some extent, they will be forced to eat the tariff and make lower profits. (The evidence is that most is passed on.) But in both cases, consumers or companies here are paying the tariff.

The only way that foreign countries would pay the tariff is if the price of the goods they export to the United States falls as a result of the tariff.

We got new evidence on that story on Friday, as the Bureau of Labor Statistics released data on import prices for June. The release showed non-fuel import prices were up 0.4 percent in June and 4.2 percent year-over-year (YOY).

Just to be clear on what these numbers mean, these are prices before any tariffs are applied. That means if the average tariff rate is 10%, then we are paying 14.2 percent more for our imports in June of 2026 than in June of 2025. That doesn’t look like a story where exporters are eating the tariffs.

It is worth noting that this is a change from past patterns. Import prices were actually falling in 2023 and rising slowly in 2024. There are a variety of factors affecting the price of producing goods elsewhere, including Trump’s war in Iran, but in any case, the story with import prices looks worse than before Trump took office, even before we consider the impact of the tariffs.

Looking across countries, it is hard to find evidence that anyone is eating Trump’s tariffs. The price of imports from the EU is up 3.7 percent YOY. The price of imported manufactured goods from Canada is up 10.3 percent. And the price of goods from China is up 1.3 percent.

While the story should have already been clear, the new data just further shore up the case. When Trump threatens countries with big tariffs, he is threatening the American people with big taxes.

This point should be made more clearly in reporting. For example, it is misleading to say that Trump is threatening to hit Brazil, Canada, or whoever with new tariffs. He is threatening to impose taxes on goods that Americans import from these countries. That would make it clear what is at stake.

We may never know, or care, what is in Trump’s head, but we have never seen a president who is so happy to raise people’s taxes.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Mainstream Media Still Doesn't Know What To Do With Trump's Big Lies

Mainstream Media Still Doesn't Know What To Do With Trump's Big Lies

A few days ago the Wall Street Journal published an oped by President Trump wherein he argued how great the US economy is on his watch and why tariffs are the main reason for that greatness. It’s a steaming mess of an argument, a firehose of falsehoods, though the one upside is that I haven’t seen it referenced anywhere. It sunk like a stone under the weight of its lies.

I won’t go through them here (though I’m about to link to a strong rebuttal), as it would be a waste of both of our times. Also, as you’d expect, it’s a greatest hits album with all the golden oldies he constantly blathers on about: inflation is zero (vs. 2.7 percent in the last CPI reading), prices are down, foreigners have invested “$18 trillion!” in America (that would be 60 percent of GDP; biz investment is currently 14 percent of GDP). The irony is that, as I’ve often stressed in these pages, the macro economy is, in fact, quite solid, even if the job market has worrisomely softened.

By far, the most potentially consequential macro development over the past few years is faster productivity growth. If that sticks—if we’re really, lastingly generating more output per hour of work—it means the US economy can grow faster without worrying about inflation picking up. Of course, there’s no guarantee that faster growth reaches working-class people in the form of higher wages, income, wealth; often, it has not. But those are all other discussions.

At any rate, I saw no reference to this hot mess until this morning, when a prominent newspaper ran a fulsome rebuttal to Trump’s claims. This new piece points out that solid research shows that, of course, tariffs have not been absorbed by exporters but passed through to American businesses and consumers, generating higher prices on those imports, hurting investment, and making production more, not less, expensive for our own manufactures, who have been aggressively shedding jobs (half of our imports are inputs into domestic production).

That prominent newspaper is the same Wall Street Journal that published Trump’s oped.

What should one make of this? How is one supposed to process the fact that the media publishes, without criticism or an accompanying fact check, a cascade of outright lies, only to rebut it a few days later? What does that say about our collective understanding of reality? And what should the WSJ have done in this case?

If you’re a newspaper with an oped page, and the President gives you an oped, you can argue that such a piece is de facto newsworthy. As the Journal editors themselves said in their rebuttal, “We thought we owed him the opportunity after our criticism of his tariffs.”

But unless his argument is fact-based and substantive, that’s ridiculous. The WSJ’s criticism of Trump’s tariffs has been wholly fact-driven—they’re consistently done great work on this, and I say that as someone whose ideology differs sharply from that of this ed board. If they say 2+2=4, nobody, not even the president, gets to pushback with 2+2=5.

I give them some credit for coming back with “no, it’s 4.” But that doesn’t fix what’s broken here.

I had a similar complaint about the New York Times' recent big-deal interview with Trump in the Oval. You can listen to the recording. They ask a question. He lies. They move on to the next question.

The only way to understand this is as performance art. It’s not a discussion about reality, facts, how policies play out in the real world. It’s a game, wherein Trump describes his alt reality and the media prints it because he’s the president and his reality matters. Which is true. It matters a lot and it’s one of the main reasons we’re in the mess we’re in. Never before has a president and his whole operation been so detached from reality, to the point wherein we see horrific things with our own eyes and they immediately say “no, that’s not what happened.”

But this is not benign, cute, or harmless. It’s not “oh, there he goes again! Whaddya gonna do? He’s the POTUS! You’ve got to run it.” It’s not just another flavor of our intense partisanship. It’s corrosive at best and fatal to democracy at worst. Allowing this false reality to fester has now been shown to be literally fatal to our fellow citizens.

I’m not a media expert, and I’m well aware that they’re in the business of selling news, and that clickbait = $ (though again, no one seemed to pick up on Trump’s op-ed). But there is no question in my mind that publishing falsehoods, even from the president—especially from the president—is not worth the money.

You may be thinking, “hey, it’s the op-ed page, not a column.” Well, I’ve written lots of op-eds and in every case, the editors insist that facts be verified. I’m not the president, but there’s absolutely no reason that the same rules shouldn’t apply.

Yes, of course, they have to cover him. But not like this.

Jared Bernstein is a former chair of the White House Council of Economic Advisers under President Joe Biden. He is a senior fellow at the Council on Budget and Policy Priorities. Please consider subscribing to his Substack.

Reprinted with permission from Econjared.

Sorry Mr. President, But The Affordability Crisis Isn't A 'Hoax'

Sorry Mr. President, But The Affordability Crisis Isn't A 'Hoax'

It was yet another performance that left us wondering about President Donald Trump’s failing mental faculties. Speaking to supporters at a rally in Mount Pocono, Pennsylvania last week, Trump was typically unhinged.

And we have two price charts. Do you remember the last time I pointed to a chart? I don't care what these charts say. My all-time favorite chart was the chart I had in Butler. I said, "Let's look at the chart." I don't care how good that chart looks, it's shit by comparison to the one in… It's nothing. I like the Butler chart. Remember that was on how great employment was and all this, but I like it for other reasons. Look at that chart. It's good. But now that I talk about the Butler chart, I don't even want to look at it, doesn't mean anything. But look, Biden price increases and Trump price increases. Look at Biden. Up 37, 24%, 22, 21, 30.7, 30.7 again, 10.4%, 49%. Trump, the price is down 5.1, 4.2, 0.5, down 4%, 2.9. Look at that. Our prices are coming down. Their prices, it's a hoax. They're just … Remember they said the Inflation Reduction Act, remember that? Billions and billions, hundreds of billions of dollars, the inflation, and after they got it approved, because we had a few Republicans that went along with that whole hoax.

If there was a coherent thought buried in all that gibberish, he later tried to summarize it this way: “Prices are coming down very substantially. But they have a new word. They always have a hoax. The new word is affordability.”

He can call it a hoax all he wants, but Trump and his team know affordability is a real problem. That’s why he’s suddenly trying to co-opt the term, like a cringe Truth Social post declaring himself “THE AFFORDABILITY PRESIDENT.” It’s also why his team has sent him out on what it’s calling an “affordability tour,” which is how he ended up in Mount Pocono at the Mount Airy Casino Resort. The largest ballroom there holds about 1,200 people—a telling choice by a campaign clearly afraid of empty seats at a sizable venue.

What should worry Republicans is not just the optics, but the substance. A rally supposedly designed to counter Democratic attacks on affordability instead showcased Trump creating an entire alternate reality.

“We’re getting inflation,” he said. “We’re crushing it, and you’re getting much higher wages. I mean, the only thing that’s really going up big, it’s called the stock market and your 401(k)s that’s going up.”

That line should sound familiar, because Democrats already tried it—and paid the price. President Joe Biden and Vice President Kamala Harris spent much of the 2024 campaign insisting the economy was strong, that inflation was cooling, that wages were up, and that voters simply didn’t understand how good things really were.

Voters didn’t buy it. Telling people they’re wrong about their own financial stress is a losing message, no matter which party delivers it.

Trump is now making the exact same mistake, only he’s louder and more detached from the lives of the people he claims to be fighting for. Instead of acknowledging the pain people are actually feeling, he reached for a familiar crutch: bragging about the stock market, as if that is supposed to mean something to an audience in Appalachia or to anyone struggling to pay rent or buy groceries.

And he couldn’t stop.

“The stock market has set 51, this is in less than 10 months,” Trump said. “The stock market has set 51 all-time record highs. There’s never been anything like that. Bum, bum, bum, bum, bum, bum.” He repeated the claim again for good measure.

Then came a reprise of the “let them eat cake” routine he’s been workshopping for a while. After bizarrely claiming that without his tariffs “you would have no steel,” Trump explained that Americans should simply do without other consumer goods.

“You can give up certain products. You can give up pencils because under the China policy, every child can get 37 pencils. They only need one or two,” he said. “You don’t need 37 dolls for your daughter. Two or three is nice, but you don’t need 37 dolls.”

It’s remarkable watching so many cultish conservatives swing from “Don’t tread on me” to “Please daddy Trump, tell me how many dolls my daughter can have.” For the broader electorate, though, this message is political poison.

Trump's Obsession With His 'Beautiful' Tariffs Is Getting Even Crazier

Trump's Obsession With His 'Beautiful' Tariffs Is Getting Even Crazier

Some kids will have a favorite toy or stuffed animal that they latch onto and keep with them at all times. It can be cute, and they usually grow out of it, so there’s no real harm. It’s a bit different when the kid is the president of the United States and the item he chooses to latch onto is a major policy tool that he does not understand at all.

The item of course is tariffs, which Donald Trump has pronounced as the “most beautiful word in the English language.” This alone should be 25th Amendment stuff. Tariffs are taxes on imports, nothing more, nothing less.How can a type of tax be the most beautiful word in the English language? Imagine someone getting teary eyed and sentimental over “gasoline taxes” or maybe “land transfer taxes.” This is real whack job stuff.

But even worse, Trump doesn’t seem to understand the object of his love at all. He seems to believe that foreign countries are paying the tariffs. He often talks about them as though the Chinese, Korean, or Canadian governments are sending us checks to pay his tariffs.

That is absurd on its face. The tariffs are taxes paid at our ports by the company that imports the product. There is a possibility that the exporters lower their prices to offset the tariffs. To some extent this does happen, but research shows that only a small share -- five to 15 percent -- of the tariff is offset in the form of lower prices charged by exporters. This means that the overwhelming majority of Trump’s tariffs are paid by businesses and consumers in the United States.

And we already have the data on this with Trump’s tariffs. The price we pay, not including the tariffs, for our imports has been rising since Trump’s “Liberation Day,” not falling. This means there is no doubt, people here are paying the bulk of Trump’s tariffs, not anyone in foreign countries.

But Trump’s tariff craziness goes further. He is obviously very concerned that the Supreme Court will rule against him on the legality of his tariffs. They may decide that the first paragraph of section 8 of the Constitution, laying out the powers of Congress which says Congress has the power to impose taxes, means something like Congress has the power to impose taxes. That would mean that Trump would have to end most of his taxes and likely refund the money he raised.

Trump clearly seems to view this as a disaster. He constantly whines over this prospect. He has even taken to claiming that the Supreme Court was given “wrong” numbers on the revenue raised from his tariffs.

This is incredibly crazy for two reasons. First, Trump’s lawyers were the ones giving the court the numbers. Is he claiming that his own lawyers gave inaccurate numbers to the Supreme Court? If that were really the case, the President who is best known for his role in The Apprentice, should have used his signature “you’re fired” line at the point his case was argued.

The other reason Trump’s claim is totally crazy is he somehow came up with the number of $3 trillion as the amount that would have to be refunded. This number is beyond absurd. In a full year, our goods imports are roughly $3 trillion. Does Trump think he imposed 100 percent tariffs on all goods imports? And most of his tariffs have only been in place for half a year.

But the crazy gets worse. Trump insists that tariff revenues are about to skyrocket, as companies have drawn down inventories and will now have to bring in more goods on which they will be paying his tariffs.

There are several problems with this latest Trump story. First there is no evidence that inventories are unusually low right now. The most recent data we have show them to be somewhat higher than at the same point last year.

The second problem is one of simple logic. If tariff revenue is about to soar that would mean that imports and our trade deficit are about to soar. Trump had promised to bring our trade deficit down. Is he now claiming that it is about to go sharply higher?

But the third problem from Trump’s claim is that, if true, it would mean that we will soon be paying much higher taxes. This means that the problem of high prices and affordability that has gotten so many people upset will soon get much worse. That would be very bad news for the tens of millions of people struggling to make ends meet and a big hit to the economy’s growth.

The good part of the story is that the prospect of soaring tariffs is a Trumpian fantasy. If anything, tariff revenue is likely to be somewhat lower in the months ahead as Trump has reduced tariffs on bananas, coffee, and a number of other food items.

Also, as trade patterns adjust to higher prices, import volumes will inevitably fall. The process will be accelerated as foreign companies and countries increasingly recognize that the United States is no longer a reliable trading partner and instead look to other markets. For these reasons, the taxes we pay for Trump’s tariffs will be going down, not up.

But the bad news is that Trump clearly has no idea what he is talking about when it comes to his signature policy. He has no idea of the magnitudes or mechanisms involved in what he calls the most beautiful word in the English language. Maybe Trump doesn’t know English very well.

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