Is the U.S. Government Financially Benefitting from Added Tariffs?

Wally Tyler Tariffs
Purdue University economists fact-checks President Trump's tweet touting tariffs and the financial benefit it's providing to the U.S. government. ( MGN )

Trade negotiations between the U.S. and China are ongoing, with the trade truce now facing a deadline of less than two months away. U-S Trade Representative Robert Lighthizer has a busy schedule next week, as he and others are preparing for trade talks with China in Beijing. President Donald Trump took to twitter ahead of those talks, touting the benefits of tariffs.

The United States Treasury has taken in MANY billions of dollars from the Tariffs we are charging China and other countries that have not treated us fairly. In the meantime we are doing well in various Trade Negotiations currently going on. At some point this had to be done!

— Donald J. Trump (@realDonaldTrump) January 3, 2019

Does the government really benefit from tariffs? Purdue University Economist Wally Tyner said the President's tweet is accurate in saying the treasury does take in revenue from tariffs. However, Tyner said it's currently unknown how much the department is actually getting from the added tariffs. In the end, he said tariffs aren't good for the government or the economy. 

“The way it works is an import comes into the border, a tariff is imposed, the treasury collects that tariff,” said Tyner. “The problem is that if an import comes in and is collected , that means the price of that good is higher to all American consumer - whether it's companies or individuals. Let's say a good comes to the border and costs $1, with a 25 percent tariff, that means when it gets to the consumer, the cost embedded in that good is now a $1.25. So, the consumer is paying the cost of that tariff, it's not that it's great for revenue for the government; it's that it harms consumers - whether they're businesses importing steel or whether it's consumers importing electronics. That's the problem with tariffs.”

Tyner also said tariffs harm the U.S. long-term, as it means goods and services in the U.S. cost more.

“Those importing countries are paying more and they’re finding other countries to get their products from,” said Tyner. “So, tariffs are bad for the economy in the long-run.”

Tyner said we’re already seeing the negative impact tariffs are having on the economy in the short-run. He said any economist will tell you “free trade” is better for the economy, as it makes the economy more efficient.

 
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