“For years, hardworking American citizens who were forced to sit on the sidelines as other nations got rich and powerful, much of it at our expense. But now it’s our turn to prosper and in so doing, use trillions and trillions of dollars to reduce our taxes and pay down our national debt.”
This is exaggerated. In Trump’s telling, the United States is a poor country, beset by outside forces. Not only does the U.S. have the largest gross domestic product in the world, but its per capita GDP is much higher than any large country. For instance, GDP per capita in the United States is nearly $90,000, compared with $14,000 for China, $58,000 for Germany and $36,000 for Japan.
Tariffs are in effect a tax increase, one that falls heavily on lower-income workers. Economists agree that tariffs — essentially a tax on domestic consumption — are paid by importers, such as U.S. companies, which in turn pass on most or all of the costs to consumers or producers who may use imported materials in their products. As a matter of demand and supply elasticities, overseas producers will pay part of the tax if there are fewer goods sold to the United States. Domestic producers in effect get a subsidy because they can raise their prices to the level imposed on importers.
Not only will tariffs be unlikely to reduce the budget deficit — especially if the economy sinks — but it’s a fantasy to suggest the national debt can be paid with tariffs.
