Tariffs are in effect a tax increase, one that falls heavily on lower-income workers. Economists agree that tariffs – essentially a tax on domestic consumption – are paid by importers, such as US companies, which in turn pass on most or all of the costs to consumers or producers who may use imported materials in their products.
As a matter of demand and supply elasticities, overseas producers will pay part of the tax if there are fewer goods sold to the US. Domestic producers in effect get a subsidy because they can raise their prices to the level imposed on importers.
Not only will tariffs be unlikely to reduce the Budget deficit – especially if the economy sinks – but it’s a fantasy to suggest the national debt can be paid with tariffs.
“The United States charges other countries only a 2.4% tariff on motorcycles. Meanwhile, Thailand and others are charging much higher prices, like 60%, India charges 70%, Vietnam charges 75%, and others are even higher than that. Likewise, until today, the United States has for decades charged a 2.5 tariff. Think of that 2.5% on foreign-made automobiles. The European Union charges us more than 10% tariffs.”
Some of Trump’s numbers are suspect. India charges a 50% tariff on motorcycles, not 70%, and recently announced a cut to 40%. In any case, Harley-Davidson already got around that duty by assembling in India most of the motorcycles sold in the country.
While Trump highlights the low US tariff on foreign cars, he ignores the fact that for more than 50 years the US has imposed a 25% tariff on pickup trucks. That’s much higher than the European tariff on cars.
Moreover, Trump ignores that trade can be mutually beneficial. The European Union is the largest export market for the US, and if the Europeans retaliate, that will be a big loss for American manufacturers. International trade works in such a way that some countries dominate some markets and don’t compete as much in others. The French have trade restrictions on US wine, just as the US has trade restrictions on French clothing.
“Toyota sells one million foreign-made automobiles into the United States, and General Motors sells almost none. Ford sells very little. None of our companies are allowed to go into other countries.”
This is misleading. Market forces, not trade, are a critical factor. American cars have fared poorly in Japan because the Japanese prefer smaller, more fuel-efficient models. But the Chinese like American cars, which, contrary to Trump’s claim, are allowed to be sold there. Until 2023, General Motors sold more cars in China than in the US, but sales have fallen because China has developed a preference for electric cars – where GM has lagged.
“Canada, by the way, imposes a 250 to 300% tariff on many of our dairy products. They do the first, the first can of milk, they do the first little carton of milk at a very low price. But after that it gets bad, and then it gets up to 275, 300%.”
Trump has forgotten he fixed this. The high dairy tariff was largely eliminated in Trump’s renegotiation of the North American Free Trade Agreement (Nafta) during his first term. Now it only kicks in after the US has hit a certain level of tariff-free sales in a year – which has not yet happened.
“And with countries like Canada, you know, we subsidise a lot of countries and keep them going and keep them in business. In the case of Mexico, it’s US$300 billion [$518.43b] a year. In the case of Canada, it’s close to US$200 billion [$345.62b] a year.”
These numbers are wrong. The “subsidy” to Canada supposedly includes military benefits the US provides to the Nato ally, but we fact-checked this and the numbers did not add up. In 2024, the deficit in trade in goods and services with Canada was about US$45b ($77.76b). The trade deficit with Mexico was about US$172b ($297.23b) in 2024.
“Then in 1913, for reasons unknown to mankind, they established the income tax so that citizens, rather than foreign countries, would start paying the money necessary to run our government. Then in 1929, it all came to a very abrupt end with the Great Depression, and it would have never happened if they had stayed with the tariff policy, it would have been a much different story.”
This is nonsense history. The income tax was intended to shift the burden to wealthier Americans as the cost of tariffs fall mainly on lower-income people. Tax revenue was also considered a more stable source of funds. One big advocate for an income tax was Theodore Roosevelt, a Republican. As for the Great Depression, many historians credit the Smoot-Hawley Tariff Act, signed into law in 1930, as worsening the economic slowdown because it sparked a global trade war.
“But since the very beginning of Nafta, our country lost 90,000 factories. Think what that is – 90,000.”
The 90,000 factories statistic is dubious. The figure comes from the Census Bureau’s Business Dynamics Statistics, which has a tool that breaks down the data. About a third of the manufacturing establishments employ four or fewer people, which hardly makes them factories. The manufacturing establishments with more than 500 people fell from 4535 in 2000 to 3316 in 2022. That’s a decline of about one-quarter, but the number (1219) is much smaller than 90,000.
“And five million manufacturing jobs were lost while racking up trade deficits of US$19 trillion ($32.83t). That [Nafta] was the worst trade deal ever made.”
This is mostly because of China. Trump pins the blame on Nafta but a key factor in a decline of manufacturing was China entering the World Trade Organization. The nonpartisan Congressional Research Service in 2017 concluded the “net overall effect of Nafta on the US economy appears to have been relatively modest, primarily because trade with Canada and Mexico accounts for a small percentage of US GDP”, though it noted “there were worker and firm adjustment costs as the three countries adjusted to more open trade and investment among their economies”.
“Apple is going to spend US$500 billion [$864.04b]. They never spent money like that here.”
Biden got a similar deal. A few months after Biden took office, Apple pledged to invest US$430b ($743.08b) over five years in the US. Adjusted for inflation, that’s US$525b ($907.24b).
“If you look at China, I took in hundreds of billions of dollars in my term.”
This is false. Records maintained by US Customs and Border Protection showed about US$75b ($129.61b) was raised on Chinese goods by the time Trump left office – most of which was paid by American consumers. (He also had to spend US$28b or $48.39b to bail out farmers harmed by the loss of business to other countries when China retaliated.)
“They [China] never paid 10 cents to any other president, and yet they paid hundreds of billions.”
This is false. Tariffs have been collected on Chinese goods since the early days of the Republic. President George Washington signed the Tariff Act of 1789, when trade between China and the US was already established. Tariffs on China generated at least US$8b ($13.82b) every year since 2009.
