So is it time for me to retract my 2015 criticism?
Look at this horrifying tweet that Trump issued yesterday. The President is actually claiming that the economy is doing well because of higher tax payments.
For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars....— Donald J. Trump (@realDonaldTrump) May 5, 2019
This has to be Trump’s worst-ever tweet, at least with regards to economic policy.
Needless to say, it’s strange to see a Republican president make the same argument.
But Trump’s tweet isn’t just bad from the perspective of fiscal policy.
He also shows that he doesn’t understand trade policy, either from a technical perspective or an economic perspective.
For instance, the tariffs (i.e., trade taxes) technically are paid by those making the purchases (i.e., importers), not by the sellers (i.e., Chinese companies).
But just as the corporate income tax is really a tax on people (either as workers, consumers, or shareholders), the burden of trade taxes also falls on people.
In other words, American consumers are paying for Trump’s tariffs.
Which gives me an excuse to share Trump’s second-worst-ever tweet, which was issued this morning.
The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!— Donald J. Trump (@realDonaldTrump) May 6, 2019
At the risk of understatement, the United States doesn’t “lose” $500 billion by trading with China.
Americans voluntarily purchase lots of output from China and both sides benefit (otherwise the transactions wouldn’t occur).
And many Chinese use the dollars they earn to invest in the U.S. economy, another set of win-win transactions.
The bottom line is that Trump should stick to tax policy and regulatory policy, since those are areas where his policies have been beneficial.
P.S. If Trump was focused on Chinese technology theft or Chinese industrial subsidies, I would be at least partly sympathetic. Especially if he utilized the World Trade Organization and included our allies. But he’s mostly attacking China because he doesn’t like the voluntary decisions of American and Chinese consumers and businesses.