Photo: AFP
Photo: AFP

On Tuesday, the United States’ commander-in-chief did his best to buck up his troops engaged in economic warfare with the world’s second-largest economy.

Those troops – the US public – were not going to pay tariffs, President Donald Trump again told reporters in response to a question about the latest escalation in a trade war with China.

“We’re having a little squabble with China because we’ve been treated very unfairly for many, many decades,” he said on the White House lawn.

“We are, again, in a very, very strong position. They [the Chinese] want to make a deal. It could absolutely happen, but, in the meantime, a lot of money is being made by the United States,” he said, in reference to his oft-repeated claim that China pays the tariffs that Washington has imposed on Chinese goods.

Some analysts have suggested that Trump – who has championed the effectiveness of tariffs since long before he took office – is making the demonstrably false claim as a public relations tactic. After all, even his top economic advisor admitted on Sunday that it is US importers, and by extension consumers, that pay the import duties.

“Yes, to some extent. I don’t disagree with that,” National Economic Council head Larry Kudlow said on Fox News Sunday when pressed to acknowledge the US pays for tariffs, before adding that, ultimately, “both sides will pay.”

The logic is reminiscent of Trump’s revised argument for how Mexico will pay for a wall on the southern border of the US.

“Mexico is paying for the wall through the new USMCA Trade Deal,” he wrote in a Twitter post earlier this year, responding to criticism that $5.6 billion appropriated by Congress to build the structure contradicted his claim that Mexico will foot the bill.

Despite the confidence with which Trump made the claim, the US-Mexico-Canada Agreement, as the renegotiated North American Free Trade Agreement has been dubbed, has not yet been passed into law in any of the three countries, suggesting the comments were intentionally misleading.

But there is evidence that Trump truly believes that China pays for import duties.

According to a handful of current and former administration officials, Trump “actually believes that China pays the tariffs,” Axios reported on Tuesday. His embrace of tariffs, one former aide reportedly said, is “like theology.”

A glance at one of Trump’s sources of economic information gives an indication of what drives the president’s unorthodox view.

Fox Business Network host Lou Dobbs has been described as an “unofficial policy whisperer” for Trump. Former White House chief strategist Steve Bannon credits the brash anchor with feeding the president most of his talking points on China. Dobbs is also a staunch believer in the power of tariffs, and continues to argue on his nightly program that US importers, contrary to popular belief, do not ultimately pay for the import duties.

“You’ve gotta remember, a lot of this [campaign rhetoric about China] was [Trump] just reciting everything he heard from Lou Dobbs … He’s been a guy that’s watched Lou Dobbs for 30 or 40 years. And the only thing he had formed as a world view was China,” Bannon said during an interview in a recent NPR documentary.

The president trusts the television personality enough that, during a meeting of his council of economic advisors in March, he called him to join the private briefing via teleconference.

“We were just in there briefing him on the numbers and he picked up the phone and called you,” Trump economic advisor Kevin Hassett said in an interview with Dobbs, who gleamed with pride at the mention.

On Monday, Dobbs said that those in the press that disagree with Trump about the nature of tariffs are “spewing such nonsense.”

“This is such an important point … Because we are watching some of the business press in this country, the political press, the left-wing media, I mean, they are spewing such nonsense about tariffs,” Dobbs said.

His guest, Milken Institute chief economist Bill Lee, agreed.

If an importer can’t buy the product from a non-tariffed country, “he knows that he can’t raise the price on the American consumer … So he’s going to try to push the price increase, the tariff increase, back onto the Chinese producer,” Lee argued.

But research has shown that US consumers are bearing the brunt of tariffs, despite any pain felt by Chinese businesses.

In fact, according to a study produced by economists from the Federal Reserve Bank of New York, Princeton University and Columbia University, it is costing the US public a hefty sum.

“We find that the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018,” the economists wrote. By the end of 2018, they said, “import tariffs were costing US consumers and the firms that import foreign goods an additional $3 billion per month in added tax costs.”

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