By Glynn Wilson –

This might be a good time for Secretary of the Treasury Steven Mnuchin to sit down for lunch with President Donald J. Trump at the White House, or maybe play a round of golf with him, to explain how tariffs actually work and brief him on the history of how trade wars inevitably fail and damage the domestic and global economy.

Besides, Republicans tend to campaign on pledges of “no new taxes,” and tariffs are, clearly, taxes ultimately paid by American consumers, not foreign governments.

But reality and facts are not Trump’s strong suit. He defended his decision to impose more tariffs on China this week on TV and Twitter, claiming that tariffs bring in billions of dollars in revenue to the U.S. from China and that they actually help taxpayers and farmers.

China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a “match,” it would be game over, we win! In any event, China wants a deal!

— Donald J. Trump (@realDonaldTrump) May 14, 2019

But financial experts say that is not the case.

According to explanatory journalism from CBS News and many other sources anyone can find on the internet using a search engine, “as a tool of national policy, tariffs had long been fading into history, a relic of the 19th and early 20th centuries that most experts came to see as harmful to all nations involved.”

“Yet more than any other modern president, Mr. Trump has embraced tariffs as a punitive tool — against Europe, Canada and other key trading partners but especially against China, the second-largest economy after the U.S.”

What are tariffs? How do they work and who pays them?

Tariffs are taxes on imports charged as a percentage of the transaction price a buyer pays a foreign seller. To use a simple example anyone can understand, say an American retail company like Levi’s Jeans buys 100 pairs of pants from a manufacturer in China for $10 a pair, and then sells the pants for $20, for a 100 percent retail markup. The cost would be $1,000 and the profit would be $1,000.

But if the U.S. Department of the Treasury imposes a 10 percent tariff on the import, that would raise the cost to $1,100, and either the company would raise the price of the pants to $21, decide to take a 10 percent cut in its profits, or buy from a different manufacturing outlet, maybe in Vietnam or Honduras. Some companies, such as Wrangler, have already decided to make more of their jeans in the U.S.

This seems to be part of Trump’s goal, although it disrupts the market in the short term, such as resulting in a 617 point drop in the stock market on Monday.

It is true that the duties or levies collected on the import do go into the U.S. treasury, that is unless companies decide not to import their goods from the country subject to the tariff. They are collected by Customs and Border Protection agents at 328 ports of entry across the country.

But what if the country, like China, retaliates by imposing tariffs on U.S. goods exported to its country, say farm products like soybeans? Then the price of those goods goes up, so companies in China may decide to buy soybeans from farmers in some other country, like Brazil, which actually grows and experts more soybeans than the U.S..

Not only do American consumers pay more for jeans, American farmers may be left with soybeans they can’t sell sitting in silos to rot.

Who benefits from that? Only an American politician potentially who can fool enough voters into believing that a trade war is a good thing.

Only about 1 percent of the federal budget comes from tariffs on imports. Most of the money coming into the federal treasury comes from individual and corporate income taxes. See the graphs here: Treasury Department: Receipts and Outlays of the United States Government

Senator Jones Fights Trump’s Trade War

U.S. Senator Doug Jones of Alabama joined Democrats and Republicans in Congress this week opposing the president’s tariffs and trade war. He spoke on the Senate floor in an attempt to explain that tariffs are taxes and called for an end to the trade war, saying it is hurting farmers in Alabama and across the country.

He also proposed new legislation to help farmers impacted by the trade war by expanding Trade Adjustment Assistance.

“I agree with the President 100 percent that we need fair trade deals and we have to make sure that American workers and consumers are not being taken for a ride by other countries — especially rogue countries and bad actors like China. But since this trade war began last year, these tariffs are having the complete opposite effect on the people that they are supposed to help,” Senator Jones said. “That’s because tariffs are taxes, plain and simple. From businesses to farmers to consumers, these taxes are being paid for by Americans. That’s not politics. That is economics.”

Video: U.S. Senator Doug Jones delivers remarks on the Senate Floor on the devastating effects of the trade war with China.

Some Republicans in Congress, who seem increasingly frustrated with Trump, took the unusual step of openly criticizing a president from their own party this week.

“I’m not sure if you talk to him face to face, he hears everything you say,” said Senate Finance Committee Chairman Charles E. Grassley, a Republican from Iowa, where farmers are hurting from Trump’s tariffs and trade war. He seems to have emerged as one of Trump’s top critics on trade and promised to write a letter to Trump explaining the concerns of American farmers.

Senator Jones also introduced legislation this week that would offer financial and technical support to help farmers and producers recover losses caused by the president’s ongoing trade war with China.

The Assistance for Farmers Harmed by Tariffs on Exports Act will offer Trade Adjustment Assistance (TAA) to those hurt by China’s retaliatory tariffs.

TAA was created in 1962 to provide direct financial and technical assistance to workers impacted by changes in global trade. In 2002, the TAA program was expanded to include assistance to growers, producers and fishermen if they experienced hardship as a result of changing commodity markets from increased imports.

“Unfortunately, the current TAA program provides no help to farmers whose exports are hurt by changing policies and retaliatory tariffs triggered by our own government’s actions,” Senator Jones said. “These tariffs are taxes and they’re hurting our farmers especially. Not only are they trying to get back on their feet after natural disasters like Hurricane Michael, but they are facing a double-whammy from the president’s trade war with China.”

He said he agreed the U.S. should punish China for taking advantage of the United States, “particularly when it comes to issues like steel pricing and intellectual property theft.”

“But this trade war has so far only hurt hard-working Americans,” the Senator said. “I’m hopeful that my legislation will help lessen the pain these tariffs have caused our farmers, while at the same time I’ll continue to urge an end to this pointless trade war.”

Senator Jones has been a vocal advocate on behalf of the American farmers, workers, and consumers who have been hurt by the new taxes resulting from the president’s trade war. He has taken a number of actions over the past year to mitigate the negative effects of imposed and threatened tariffs, including:

* Introducing bipartisan legislation to help family farms reorganize after falling on hard times as bankruptcy rates among American farmers near record highs;

* Partnering with Senator John Hoeven (R-N.D.) to urge the President to announce the second round of agricultural tariffs trade assistance;

* Leading a bipartisan effort to get answers from the Commerce Department about whether imports of autos and auto parts threaten national security;

* Introducing a bipartisan bill to reform and strengthen the national security tariff process in response to threatened national security tariffs on autos and auto parts; and,

* Leading a letter with Senator Lamar Alexander (R-Tenn.) to the Commerce Department to urge the administration to reconsider its threatened 25-percent auto tariffs.

More Reading

Atlantic Magazine: How Trump Thinks Tariffs Work (And How They Actually Work)

NYT: How Tariffs Work, and Why China Won’t See a Bills