Trump is fond of saying, in support of his trade war tariffs, that as a result China is paying billions of dollars directly into the U.S. Treasury. That is blatantly and categorically false. Either Trump knows the truth and is lying, or he is just dumb about how tariffs work, which is certainly possible.
What really happens when tariffs are imposed is that the producing country, here China, does not pay a penny. The tariffs are instead paid by the company importing the product into the U.S., typically an American company. It is they who are paying the billions of dollars into the U.S. Treasury.
And guess what the importing company then does? They pass the cost on to their consumer, whether it is a business or the American public.
So at the end of the day, the billions of dollars in tariffs are in fact paid by the American consumer, not China. China is only hurt by the tariffs in so far as the increase in the cost of their products to consumers because of the tariffs causes sales to decline.
And that, as Edith Ann (the Lily Tomlin character) would say, is the truth.
* Note: Prior to publishing, this post was sent to the New York Times as a letter to the editor. When a few days later they published an editorial making this very point, I was free to publish my post.
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