While announcing the further escalation of trade war with China last weekend by implementation of another round of tariffs President Trump stated that tariffs imposed in the past on Chinese products has boosted the economy and are partially responsible for excellent economic results. But economist Euler Hermes and economics professor Michael O’ Moore of George Washington University state that it is hard to justify this declaration. Though there has been a sharp reduction in imports due to tariffs and helped the GDP look impressive, the economy has grown despite the increase in tariffs. Moore stated that American economy is thriving due to economic initiatives like deregulation, tax cuts and low interest rates.
According to other economists Mr. Trump declarations that Chinese are paying the tariffs levied by US is untrue as tariffs are borne by importers of these products which are American companies. These in turn are sold to customers at a higher price than before due to the tariffs so In other words these tariffs are paid by American consumers. Though the tariff amount collected by US customs rose by $7 billion in 2018 when compared to last year it is a very small portion of actual taxes of more than $3 trillion that Treasury collects every year.
In other words even if Trump carries out his threat of imposing fresh tariffs of around 25 percent on imports from China it is not likely to have a significant impact on national budget. Government should be making around excess of $32 .5 billion over what it is earning now for significant growth of economy. While tariff revenue in 2017 was $35 billion, with the new tariffs on China it grew to only $50 billion and the continuous fall in share markets after every fresh tweet by Mr. Trump about escalation of hostilities shows how trade wars reduce value of markets. Economists believe that this is why companies are not investing despite the huge tax break given by government.