U.S. President Donald Trump says China pays the tariffs he has imposed on $250 billion of Chinese exports to the United States.
But that is not how tariffs work. China’s government and companies in China do not pay U.S. tariffs directly. Tariffs are a tax on imports and are paid by U.S.-registered firms to U.S. customs when goods enter the United States.
Importers often pass the costs of tariffs on to customers – manufacturers and consumers in the United States – by raising their prices. U.S. business executives and economists say U.S. consumers foot much of the tariff bill.
White House economic adviser Larry Kudlow has said that both sides suffer with tariffs.
The tariff bill will rise further if Trump is unable to make progress on U.S. demands for reform in China when he meets with Chinese President Xi Jinping later this month. Trump has said he would impose tariffs on the remaining $300 billion of goods imported from China that are not yet subject to import taxes.
That includes products ranging from cellphones to baby pacifiers, and would mean almost all imports from China would be subject to a 25 percent import tax.
U.S. COMPANIES SEE RISING CONSUMER PRICES
A growing number of U.S. companies has warned about the negative impact of the tariffs on American consumers.
A wide range of companies this week have told government officials at hearings in Washington that they have few alternatives other than China for producing clothing, electronics and other consumer goods. They have said alternatives would cost more, and that the next round of tariffs could wipe out profits and cost jobs.
Nike Inc and 172 other footwear companies have urged Trump to remove footwear from a list of imports facing a proposed extra 25% tariff, warning the move could cost consumers an additional $7 billion a year.
Walmart Inc, the world’s largest retailer, and department store chain Macy’s Inc have warned that prices for shoppers will rise due to higher tariffs on goods from China.
WHAT THE ‘TARIFF MAN’ SAYS
Trump, who has called himself the “Tariff Man,” has often repeated that China pays for U.S. tariffs on its goods.
“We have billions of dollars coming into our Treasury — billions — from China. We never had 10 cents coming into our Treasury; now we have billions coming in,” he said on Jan. 24.
On May 5, he tweeted: “For 10 months, China has been paying Tariffs to the USA.”
As well as imposing tariffs on Chinese goods, Trump has also imposed a tax on global steel and aluminum imports and shipments of washing machines and solar panels.
Trump and top members of his Cabinet have said that the tariffs are accelerating a move of manufacturing out of China.
HOW TARIFFS REALLY WORK
U.S. Customs and Border Protection (CBP) collects the tax on imports. The agency typically requires importers to pay duties within 10 days of their shipments clearing customs.
Through May 1, Washington has assessed $23.7 billion in tariffs since early 2018, according to data from the CBP.
Total tariff revenue – including levies that predated Trump – shot up by 89% in the first half of the current fiscal year starting Oct. 1, to a total of $34.7 billion, according to U.S. Treasury data.
Every item imported into the United States legally has a customs code. Importers are expected to check the tariffs and other taxes and duties due on the goods they bring in, calculate what they owe, and pay it.
U.S. Customs reviews payments and sends importers a fresh bill if it detects underpayment.
Importers also have to post payment guarantees, or import bonds, with customs. The costs of these bonds have risen with tariffs, an additional burden on U.S.-based firms importing goods from China.