In an interview on CBS’s ‘Face the Nation’, former US treasury secretary Hank Paulson was asked about the latest round in the tariff war that President Donald Trump has embarked upon with China (he has raised tariffs on $200bn of Chinese goods from 10pc to 25pc). Mr Paulson replied, “You’re darn right I don’t like tariffs.”
He continued: “Why don’t I like them? Because they’re a tax on the American consumer. But I see an even more perverse effect with tariffs.
“Those who do us the great honour of investing in America, of doing business with our companies and suppliers, do so because we’ve always had predictable, reliable economic policies. Tariffs jeopardise that.”
Mr Paulson suggested that politicians could always try “the tactic of working with our allies to put pressure” on China. Mr Trump did the opposite: He backed out of the Trans-Pacific Partnership (which excluded China) and picked trade fights with Europe and Canada.
Democratic presidential candidate and senator Michael Bennet of Colorado made the same point as Mr Paulson earlier on the programme, explaining, “What I would do differently is mobilise the world against China’s mercantilist trading policies, which the president is right to point out have been unfair.”
However, Mr Bennet warned that “putting tariffs on our allies, putting tariffs on even the Chinese that are actually taxes on American producers, American farmers, taxes on the American consumer and taxes on the American worker, I think are completely the wrong way of doing this. I can assure you the Chinese have a longer attention span than Donald Trump has.”
Mr Trump still seems to believe that someone other than US consumers and importers pay the tariffs. (He might consult National Economic Council Director Larry Kudlow, who was forced to fess up that Trump’s claim is false.)
If Mr Trump acknowledged reality, he’d have to admit that he’s effectively raised taxes on these businesses, farmers and consumers.
Mr Trump’s trade tax on Americans should be an inviting target for Democrats, but too many of them have fallen in love with protectionism.
When Mr Trump says the US is getting wealthier from all those tariffs, he means the government is getting more revenue from Americans. (That would be like a President Elizabeth Warren saying the US is getting richer by raising income taxes.)
Mr Trump is either wilfully ignorant or simply unwilling to recognise the extreme hardship he is inflicting on many Americans, especially in deep-red farm states.
Even Republican senator Rand Paul, ordinarily one the most emphatic apologists for President Trump, argued on ABC’s ‘This Week’ that for some companies, “the tax cuts specifically helped them but that the tariffs are almost equal in punishing them.”
He continued: “The farmers in Kentucky are concerned about the tariffs, and I’ve talked to the administration about this. I’ve said my concern is that the great benefits of the tax cut, which have low unemployment and incredible economic growth, could be raised by this tariff war as we ratchet it up with China. I’m very concerned.
“However, we’re in the middle of this and the president is playing…a negotiating battle with the Chinese, and I think he feels that at this point they can’t really back out.
“I think there are ways the Chinese market could open up and that would be good, but I still have advised the administration, ‘get this done’, because the longer we’re involved in a tariff battle or a trade war, the better chance there is that we could actually enter into a recession because of it,” he said.
Unfortunately, Mr Trump has no idea how to “get this done”, which is why he is now suggesting that the US economy benefits with tariffs in place (something virtually no credible economist would agree with).
Mr Trump needs to “win” in China negotiations for the 2020 election; China plays the long game over decades to achieve its economic aims.
Mr Trump therefore is far more likely to be pushed into a poor deal that he’ll try to dress up as a win than China is to cut him a break and make critical economic concessions.
If some voters seem rather unimpressed with Trump’s tax cuts, it might be because between rising health-care costs and tariffs (aka Trump’s trade tax), they don’t feel richer.
And if you are a farmer or other resident in the heartland who now sees farm-belt bankruptcies soaring and massive floods (which Trump will not acknowledge is one dangerous consequence of climate change), you might think Trump, the king of debt and tax losses, is just another slick politician who lied to you. You’d be right. (© Washington Post)
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