President Donald Trump was playing defense about his tariffs this week.
He argued on Twitter that the punitive taxes on incoming goods are pouring billions of dollars into the economy, and earlier in the week he said they had absolutely nothing to do with GM’s announced closure of plants in the US.
“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. If companies don’t want to pay Tariffs, build in the U.S.A. Otherwise, lets just make our Country richer than ever before!” Trump tweeted Thursday.
But the “billions and billions” Trump says the tariffs have brought in, while it does technically measure in the billions, is not actually that simple.
Each fiscal year the Treasury Department announces receipts – the money coming into the government – and those tariffs are reflected as “customs duties.” They had been relatively flat for years, but did rise in the 2018 fiscal year, from $34.6 billion in 2017 to $41.3 billion.
That’s an increase of $6.7 billion during the year in which Trump began slapping tariffs on imports worldwide, but focused on China.
Look for that number to rise more next year; the rate of tariffs on China is set to balloon from 10% to 25% after January 1, assuming there is no trade deal between the countries.
The process by which tariffs are paid, as The New York Times effectively explained, is complicated, hard to trace, and isn’t simply a bill presented to other governments, so the Chinese government didn’t exactly pay that money any more than Mexico has paid for a border wall. In fact, companies get creative at finding ways around tariffs.
Not to mention the amount of international alarm they’ve caused. Trump has tried to use them as a cudgel in negotiating trade deals like the update to NAFTA, which was signed Friday and will henceforth be called the US-Mexico-Canada Agreement (USMCA), although it still needs congressional approval.
While every little bit counts, that approximately $7 billion isn’t going to make or break the US, which reported more than $3.3 trillion in the same period and spent more than $4.1 trillion a nearly $800 billion imbalance. Not that the tariffs were billed as a way to cut down the US deficit, although that is expected to explode to well more than a $1 trillion each year if lawmakers don’t find a way to pay for the tax law passed this year.
It’s also important to note that the billions pouring in from the tariffs are also being offset by the money the government is spending to help American farmers being hurt by retaliatory tariffs. Already, the Trump administration earmarked $12 billion to help farmers, although that money will not all be paid right away, initial payments of $1.2 billion to some farmers were set to begin in September.
Trump’s tariff philosophy
Tariffs weren’t such a big deal to Trump back in October, when he told the Wall Street Journal tariffs were little more than a negotiating tactic.
“It’s so much nonsense, OK,” he said of the idea that tariffs are a long-term threat to the economy. “This is your story. We don’t even have tariffs. I’m using tariffs to negotiate. I mean, other than some tariffs on steel – which is actually small, what do we have?”
He pointed to the two trade deals he’s negotiated – with Canada and Mexico, which he signed Friday, and also Korea – and said the threat of tariffs was useful in both cases. The country that’s bearing the brunt of Trump’s tariffs, China, is currently the subject of fraught trade deal negotiations.
Not going anywhere
And if those negotiations with China don’t progress, don’t look for Trump to back off the tariffs, many of which are set to balloon from 10% to 25% in 2019.
In a separate interview with the Wall Street Journal earlier this week, he said the tariffs are working not only as a negotiating tactic, but also helping the economy.
“I happen to be a tariff person because I’m a smart person, OK? We have been ripped off so badly by people coming in and stealing our wealth. The steel industry has been rebuilt in a period of a year because of what I’ve done,” he said.
That’s another debatable point if you ask companies like GM that rely on imported steel, or like Harley Davidson, which had to move some production overseas to avoid retaliatory tariffs and drew Trump’s anger.
There are more steel jobs in the US this year than there were last year, according to the Bureau of Labor Statistics, which projected more than 382,000 Americans would be employed in the primary metals industry in October, compared to less than 375,000 a year earlier. It’s still far from the more than 435,000 employed in that industry in 2008, but not unlike that $6.7 billion increase in customs duties, those relatively few new steel jobs mean “we have a vibrant steel industry again, and soon it’ll be very vibrant.”