Trump should stop lying about tariffs - Washington Examiner

Going into his meeting with Chinese leader Xi Jinping, President Trump has gone back to spreading misinformation about tariffs.

“Billions of Dollars are pouring into the coffers of the U.S.A. because of the Tariffs being charged to China, and there is a long way to go,” Trump wrote on Twitter. “If companies don’t want to pay Tariffs, build in the U.S.A. Otherwise, lets just make our Country richer than ever before!”

This isn’t the first time that Trump has tried to perpetuate the idea of tariffs as enriching the country.

Back in August, for instance, Trump made the preposterous claim, “Because of Tariffs we will be able to start paying down large amounts of the $21 Trillion in debt that has been accumulated, much by the Obama Administration, while at the same time reducing taxes for our people.”

In reality, though tariffs do raise some money, the revenue is relatively marginal and also offset by the economic havoc that tariffs create. Tariffs are effectively taxes, and instituting them makes goods more expensive for Americans and hurts businesses that depend on international trade. When it comes to taxes, Trump has taken the position that lower taxes spur economic growth and higher taxes inhibit it, but his thinking on tariffs is the opposite and has dulled the effectiveness of his tax cuts.

The Tax Foundation has been tracking the economic effects of Trump’s campaign of tariffs this year. Though the policy is in flux as some tariffs have gone into effect and others are merely theoretical, the estimates are alarming.

The analysis finds that tariffs that have been enacted raise about $42 billion in revenue, yet they reduce long-term gross domestic product by $30 billion and lead to lower wages and the loss of 94,303 full-time equivalent jobs. But the story doesn’t end there.

When the Tax Foundation also considered tariffs that have been threatened, as well as took into account the effects of retaliatory tariffs from other countries, the analysis found that tariffs would raise $172 billion in potential revenue, while cutting long-term GDP by $148 billion and leading to 459,816 job losses.

In other words, contrary to Trump’s declarations, tariffs do not make the nation “richer than ever before,” let alone help at “paying down” the $21 trillion debt.

To reduce the debt, the government has to first start running a balanced budget. Yet in fiscal year 2018, Trump racked up a deficit of $782 billion, and that is expected to approach $1 trillion next year. Meanwhile, even without taking into account the revenue effects of reduced economic activity, the $172 billion in potential revenue from enacted and threatened tariffs would represent less than 1 percent of the debt.

Speaking of the debt, Trump has also spent his presidency making completely dishonest claims conflating the trade deficit with budget deficits.

“The United States has trade deficits with many, many countries, and we cannot allow that to continue,” Trump said last year. “For many, many years the United States has suffered through massive trade deficits; that’s why we have $20 trillion in debt.”

In reality, the trade deficit is merely a measure of the difference between the value of the goods we import and the ones that we export. It has nothing to do with the current imbalance between tax revenues and federal spending that has caused the debt to balloon.

Furthermore, there is nothing inherently wrong with a trade deficit, and the way Trump demagogues on the issue neglects to mention the fact that Americans receive goods that they want in exchange for money they spend on foreign goods. Railing against the trade deficit doesn’t make much more sense than arguing about the “deficit” Americans will have with Amazon this month while ignoring the Christmas presents they’ll be receiving.

The most charitable interpretation, offered by those who have traditionally supported free trade but have now allied themselves with the president, is that Trump’s trade rhetoric is all part of his negotiation tactics that will end up breaking down trade barriers erected in other countries and ultimately result in a freer system with fewer tariffs all around.

While the jury is still out on that optimistic perspective, it’s hard to see how exploiting economic illiteracy and spreading misinformation is necessary to accomplish that goal.

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