Commerce trade report confirms that President Trump is the tariff-tax man
As a self-proclaimed “tariff man,” President Trump often points to the billions of extra dollars he’s raised for the U.S. Treasury through his special tariffs. In fact, based on the U.S. Commerce Department’s monthly report on trade released this morning, the tariffs the president began imposing in 2018 on imported steel, aluminum, and goods from China have raised an extra $22 billion in the 12 months through this March.
Inside the Commerce Department’s report, in Supplemental Exhibit 1s, is a line for the “Calculated Duty” collected on imports for consumption for that month. From consistent monthly collections of $2.5 to $3.0 billion in 2016 and 2017 (or $32.8 billion a year), monthly duty collections have averaged $5.4 billion over the past six months.
As the nearby chart shows, duty collections for the 12 months through March 2019 totaled $54.7 billion. That is a sizable $21.9 billion increase from the average annual duty collections before 2018. Duty collections began to rise noticeably after the Section 232 steel and aluminum tariffs went into full effect in June 2018 (A), rose further when 25 percent duties were imposed on $50 billion of imports from China over the summer under Section 301 (B), and took their biggest jump after a 10 percent duty was imposed on another $200 billion in imports from China in October. If President Trump follows through on his threat to jack the duties on the $200 billion tranche of Chinese imports to 25 percent at midnight tonight, the monthly duty collections will jump even higher.
To President Trump this is all good. He claimed in a recent tweet that the duties have helped to further charge the U.S. economy, but there is no evidence that higher taxes on American consumers and importing businesses have contributed to growth. In fact the opposite is true. A recent study on the Trump tariffs by economists at the Federal Reserve Bank of New York and the National Bureau of Economic Research estimated that the tariffs imposed in 2018 were shaving about $1.4 billion off U.S. gross domestic product each month. That’s equivalent to the economic damage inflicted by the most recent “bomb cyclone” to hit the American Midwest.
Nor is it true, as the president claims, that it is China that is paying the full cost of the tariffs. Obviously, Chinese exporters are being hurt by higher taxes on their products, but the evidence shows that those costs are being largely passed through to Americans in the form of higher prices. According to the authors of the NBER paper, the evidence from the 2018 tariffs “suggests that the tariff changes have had little-to-no impact on the prices received by foreign exporters,” but instead “close to all of the cost of the 2018 U.S. tariffs has been born so far by U.S. consumers and importers.”
In other words, the $22 billion in extra revenue raised in the past year by the Trump tariffs has not come from China, but out of the pockets of tens of millions of American households stuck with paying higher prices for the goods they buy.
U.S. citizens don’t even have the satisfaction of knowing that the extra revenue has been used for deficit reduction. First, in federal budget terms, $22 billion is a proverbial drop in the bucket. It amounts to 0.6 percent of the $3.5 trillion in revenue the Congressional Budget Office estimates that the federal government will collect in fiscal year 2019. And it will be swamped by the nearly $300 billion in increased federal spending that the CBO estimates for the current fiscal year.
The same president who rightly claims credit for the 2017 tax reform bill that cut taxes for a broad swath of American taxpayers, and the extra economic growth it stimulated, should not be boasting about imposing a $22 billion (and growing) consumption tax on the same American public. And unlike income taxes, tariffs are regressive, falling disproportionately on lower income households, who spend a higher share of their budgets on just the kind of consumer goods we import from China.
Today’s Commerce Department report, among its other findings, confirms that President Trump has been successful in extracting tens of billions of additional tax dollars from his constituents with no relief in sight. That is nothing to brag about.
