WASHINGTON -- U.S. President Donald Trump promised on Twitter that tariffs would maximize the country's economic heft and "MAKE AMERICA RICH AGAIN."
Almost all economists say the president is wrong. That's because tariffs are taxes on imports. They can cause higher prices, reduce trade among countries and hurt overall economic growth as a result.
The president's tweet on Tuesday followed an announcement that the U.S. would not increase a 10 per cent tariff on $200 billion of Chinese goods in 2019. The two largest countries are in the middle of negotiating their terms of trade, after Trump said cheap imports from China were impoverishing the United States.
After Trump announced steel and aluminum tariffs earlier this year, the University of Chicago asked leading academic economists in March whether Americans would be better off because of import taxes.
Not a single economist surveyed said the United States would be wealthier.
Nobel Prize-winning economist Richard Thaler answered the survey by saying, "In net we want more trade not less. This is unlikely to help and runs the risk of starting a trade war. SAD."
A look at the president's tweet and how it compares with the facts:
TRUMP: "I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN."
THE FACTS: Trump seems to be claiming that tariffs are some kind of a membership fee for foreign companies to trade in the U.S. economy.
They're not. Tariffs are a tax, per Article I, Section 8 of the Constitution.
The costs of this tax are borne by U.S. consumers and businesses, often in the form of higher prices. Foreign companies may end up selling fewer goods and services if the United States imposes high tariffs. So they pay a price, too.
In some cases, the tariffs exist to protect industries that are vital for national security. Or, the tariffs exist to retaliate against the trade practices of other countries. Or, they might protect politically connected companies.
In the past, White House aides have insisted that Trump's tariff hikes are a negotiating ploy. Yet the president offered no such qualifications on Tuesday.
Tariffs are not seen as some easy way of generating massive wealth for an economically developed nation. Nor do the budget numbers suggest they can come anywhere close to covering the costs of the federal government.
Trump is correct that tariffs did generate $41.3 billion in tax revenues last fiscal year, according to the Treasury Department. But that is a pittance in a federal budget that exceeds $4.1 trillion.
The taxes collected on imports were equal to about 1 per cent of all federal spending.
