August 24, 2023

Federal law says import tax is paid by the U.S. purchaser, not the foreign seller. It couldn't be otherwise, because a government does not have the authority or ability to collect tax from foreigners.

That means an import tax is the equivalent of a sales tax that is paid on products or components of products. At the component level, the cost of tax gets multiplied, as it passes through layers of production. Even going from manufacturer to seller multiplies expenses including the expense of the tax.

Trump says the result would be wonderful in making foreigners pay a bunch of money into the U.S. treasury due to an import tax while causing foreigners to sell less and create less competition. The opposite is true. No foreigners pay into the U.S. treasury due to import taxes. U.S. consumers pay the tax.

Competition is not reduced, because prices must increase for U.S. products after paying import tax. In fact, when Trump increased the import tax on steel in his belligerent attempt to make America great again, it drove one of the U.S. steel companies out of business, because it, and almost all manufacturers, must import some of the materials they use.

So you would assume Trump would spew that garbage once and journalists would have it corrected. It never happens, while Trump keeps saying the same thing over and over claiming foreigners will pay into the U.S. treasury because of import taxes. Journalists simply quote Trump as if he were the unquestionable source of economic principles.

Then try to search the internet for the correction. The correct version cannot usually be found. The sources will say that an import tax targets a product. What is targeting a product? To target a duck means the duck gets killed. Doesn't that mean targeting a product means the product pays the import tax? If that is impossible, then Trump must have it figured out in claiming foreigners pay the import tax.

How about the economists who don't like Trump's idea of creating import taxes. They say the result will create a trade war. No mention of the cost to U.S. consumers. Whether a trade war exists will depend upon other factors, such as different countries being dealt with differently.

That means, to find out that the U.S. consumers pay the import tax, you have to find a description of federal law which says so. Journalists or internet sources won't tell you.

Of course, the import tax is almost never called an import tax. It is usually called a tariff. Doesn't that change everything. After arguing tariffs for 150 years, know-nothings have it all figured out. You don't change the way of thinking of brain-deads by proving something; so you have to change the terminology to add rationality to the subject.