Thursday, April 15

Trump’s claims of ‘$100 billion’ in Chinese tariff payments just don’t add up

Trump maintains the U.S. stands to gain from the latest escalation because of the added customs duties that will now flow to the U.S. Treasury.

Tariffs are taxes imposed by the government while duties are what importers have to pay. The two are not equal.

While it’s true that duties collected by the Customs Department go “directly to the U.S. Treasury,” they are hardly “massive” in terms of the government’s overall receipts.

According to Treasury Department data, overall tariff revenue collected in the latest fiscal year — on imports from China and the rest of the world — is just a drop in the fiscal bucket.

In the latest fiscal year, for example, just $41 billion — or about 1% — of the nearly $3.3 trillion in revenues raised by the federal government came from customs duties.

Trump insists the new tariff revenues will amount to $100 billion, more than double the current annual level of customs duties.

Customs duties did increase substantially beginning last July, when the Trump administration’s tariffs on China began to take hold. Since then, those revenues have been about $2.2 billion a month higher than the prior year.

Trump has claimed that the U.S. will benefit from higher tariffs on Chinese goods because China will now have to pay higher duties to the U.S. Treasury.

To be sure, a protracted period of higher tariffs on the wider list of Chinese goods would substantially boost the amount of customs duties paid to the Treasury. But that burden would be born by the importers, wholesalers and retailers who sell those goods and, ultimately, by U.S. consumers who buy them.

It’s difficult to estimate exactly how that burden would be shared. Some companies in the supply chain may choose to absorb some of the higher cost of importing Chinese goods to avoid passing along price increases that could hurt their market share.


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