The closer it gets to November, the more Americans hear about tariffs, which are on the agendas of both presidential candidates vying for their vote. But is tariff just a fancy word for tax? And who ends up paying? The answer may depend on whether you ask an economist or a politician.
Tariffs were a cornerstone of former President Donald Trump’s economic policy. Since taking office, President Joe Biden has not only kept Trump’s import tariffs in place, he’s added on, particularly with targeted tariffs on China.
The right-of-center Tax Foundation recently tallied up that more trade-war tariffs have been collected under Biden than Trump, with the vast majority of revenue coming from Chinese imports.
Meanwhile, Trump is pitching expanding his tariffs if elected to a second term. One of those proposals is a “ring around the collar,” universal tariff of 10%.
“When companies come in and they dump their products in the United States, they should pay automatically, let’s say a 10% tax. That money would be used to pay off debt, it’s a massive amount of money,” Trump said on Fox Business.
It is definitely a tax and the fact is that it raises the cost of living for everyone when we have more tariffs.
Chris Towner, Committee for a Responsible Federal Budget
In a closed-door meeting with Republican lawmakers in June, Trump reportedly proposed replacing the income tax with tariffs.
According to Investopedia, a tariff is a tax imposed by one country on the goods and services imported from another country. Governments impose tariffs to raise revenue, protect domestic industries, or exert political leverage over another country.
Both Biden and Trump insist tariffs are not a tax on Americans. When the Biden administration introduced new tariffs and a White House reporter asked about concern over tariffs causing increased prices for U.S. consumers, this was the administration’s response.
“I think that link, in terms of tariffs to prices, has been largely debunked,” U.S. Trade Representative Katherine Tai said.
Meanwhile, a Republican National Committee spokesperson told Bloomberg, “The notion that tariffs are a tax on U.S. consumers is a lie pushed by outsourcers and the Chinese Communist Party.”
Straight Arrow News interviewed three analysts from three think tanks across the political spectrum. Each of them agreed that tariffs are a tax and Americans pay for the increased cost of imported goods.
“The truth of it is that it is a tax,” said Preston Brashers, a research fellow on tax policy at the conservative Heritage Foundation. “It is something that gets passed along to consumers, and in some cases, it’s going to be something that’s passed along to producers here in the United States when they’re buying products from overseas.”
“By the most technical basis, it is a tax on imports, right? It is to try to discourage buying imports or to raise the cost of imports,” said Chris Towner, the policy director at the bipartisan Committee for a Responsible Federal Budget. “It is definitely a tax and the fact is that it raises the cost of living for everyone when we have more tariffs.”
The progressive Center for American Progress (CAP) recently did analysis on Trump’s 10% flat tariff proposal.
“I crunched the numbers and calculated that this would raise taxes for a typical family by about $1,500 a year, so every year, they would pay that tax,” said Brendan Duke, CAP’s senior director on economic policy. “I think a really key thing is that they would pay that tax on imported products that we don’t produce in the United States.”
The centrist Peterson Institute for International Economics placed an even higher price tag on Trump’s 10% tariff proposal, saying it would cost the typical American family $1,700 per year.
Of course, economic policies don’t happen in a vacuum. Trump is also planning to extend his 2017 tax cuts if reelected. The Peterson Institute combined the income benefits from extending the tax cuts with two of Trump’s tariff proposals, the 10% flat tax and 60% tariffs on China. The equation showed the bottom 80% of households would experience a net loss in income.
“We have these taxes that are based on people’s incomes,” Duke said. “[Tariffs are] based on people’s spending and we know that low- and middle-income people spend a larger share of their income, while higher-income people actually spend a very small share.”
“There are folks on the left who are really trying to make [tariffs] about a cost of living increase,” Towner said. “It does raise significant revenue. So on the one hand, yes, it raises prices. But really, it’s a flat, across-the-board tax increase.”
“Anytime you’re going to be adding to taxes, as an organization that believes in lower taxes and free trade, it is a question mark as to exactly how we’re going to go about doing that,” Brashers said.
The Tax Foundation said despite higher costs to Americans, both the Trump campaign and Biden administration continue to defend trade war tariffs. They said it’s a gap between the economic reality – tariffs are a tax passed on to American producers and consumers – and political messaging – that tariffs hurt foreign nations and help the U.S. economy.
