The problem with the American media in general is that it does not even pretend to educate. So when President Trump started talking about tariffs and how the other country will pay for it and thus bringing billions into the American treasury, the media likened the pronouncement to his earlier talk about building a wall on the southern border and have Mexico pay for it!

The initial reaction and still enduring criticism of Trump’s tariff policy is that it will increase the cost of imported good and that would hurt the American importers of foreign goods and thus ultimately the American consumer as the cost of higher imports would be passed onto the consumer. This is pretty straight forward until you add other factors into that analysis. What if the American seller decided to keep the prices level and absorb the increased cost of the imports from retained earnings, reserves, or pay out less in dividends? In that case, it is the American business entity and its investors (shareholders) who would be harmed by the tariff policy and not the consumer.

“How does the other country pay for it, if at all?” was one question that the American media has not explained to the public. Was Trump winging it when he said that the (exporting) countries would pay for the tariffs or was there some logic – as twisted as it might sound – behind such bombast? In the world of customs law and practice, tariffs on foreign goods entering the United States are paid to the U.S. Customs Service at the port of entry. So how is the other country paying for it? The answer lies not in customs law and practice but in politics of doing harm to the exporting country.

When the foreign chocolate seller exports her product to the U.S. she sells that product to the importer in the U.S. for a certain price. When the importer is forced to pay a higher tariff for that import he may ask the exporter to lower her price to him to a level that would allow the importer to maintain his price point to the U.S. consumer. When the foreign chocolate seller lowers her price so that the American importer can maintain his market share the foreign seller is likely to post less income and therefore will pay less income or corporate tax to her government. So in a way the Trump tariff policy has inflicted harm on the foreign seller and her government. That’s how the other country pays for it!

NOW, if it is also the policy of the United States to get the European allies and others to pay more for their individual and collective defense, how is that objective compatible with inflicting economic and commercial harm on them by crippling their export sector through high tariffs and thus forcing them into economic austerity or printing more money? One must ponder if all this tariff business is less about making America strong (in absolute value terms) and more about destroying or weakening the European economies?