Covert taxes on Americans

“So, China is devaluing their currency and they’re also pouring money and their currency’s going to hell but they’re also pouring money in and that will totally pay for the tariffs.” – Donald Trump, August 1, 2019

What Trump said after slow progress on trade negotiations with China is false.

Trump tweeted about imposing 10 percent tariffs on $300 billion of consumer goods to start at the end of the month. He said the tariffs may go up to 25 percent or more. China will not pay one cent for the $30 to $75 billion import fees, new taxes on American consumers.

Trump says China “promised” to buy soybeans from our farmers. There is no evidence backing this senseless claim. President Putin and Chairman Xi met last month for three days in Moscow and agreed to boost ties. China started importing wheat and soybeans from Russia in response to the previous U.S. tariffs.

China had not devalued the yuan since 2008. Unlike the U.S. dollar, the yuan is not traded in open markets and is allowed to fluctuate in a narrow margin. However, in response to the new tariffs, China devaluated the yuan. The US stock market plunged.

International trade decisions should not be left to amateurs. Multinational trade has long-lasting consequences for world economies.

How did we get here?

The world economy has changed. The invention of the intermodal shipping container to transport bulk quantities of products promoted international trade. Transportation handling, cost, and distance were no longer a barrier. Using semi-trailer trucks, rail transport flatcars, and container ships, sealed containers are transferred from trucks to rail to ships, with cranes and forklift trucks.

The U.S. trade with China lowered the price of consumer goods for Americans and the value of U.S. companies grew. Case in point: Dell Computers opened plants in Penang, Malaysia, in 1995, and in Xiamen, China, in 1999, to serve the Asian market and assemble 95 percent of Dell notebooks. Dell decided to invest in assembly plants to gain access to a growing market and lower unit costs. Dell knew the risks of moving to China. Dell, Apple, HP, and other companies have used a similar business strategy.

Who owns intellectual property?

The U.S. Intellectual Property Office grants patents to individuals to protect their inventions. Thomas Edison had, for example, more than 1,000 patents. U.S. companies acquire patent rights from their employees. Trump claimed China had been stealing U.S. intellectual property for years and promised to stop the theft.

Who gets revenues from import tariffs?

Import tariffs for products made in China are paid at the port of entry by the company buying the goods, which passes on the costs, raising prices. The import fees are sent directly to the U.S. Treasury. When prices for imported products go up, the price for other products may rise with the tide!

Dell and other companies are out of the loop, they own the intellectual property, not the U.S. government, and they don’t get compensation from the tariffs.

Economists agree import tariffs are a de facto tax on the middle class wrapped in “patriotism”. Trump followers will blindly believe China wants to destroy the American economy and will proudly pay higher prices for the Fatherland.

Income inequality

Like the 2017 $1.5 billion tax cuts for the wealthy, the Trump consumer taxes will widen the income gap and take more power from the poor and middle class. Bill Gates will not notice the price increase for his new iPhone, but the average American household will pay an additional $900 per year.

Rise up

Please share the word, all Americans need to vote and participate to protect our constitutional rights. Our climate and our economy are at high risk. No taxes on the middle class to pay for tax cuts for the wealthy.

Congress has given away the power to set import tariffs, ask your representative to take the power back. Tariffs should not be used to get elected.

Please visit or call your U.S. Congress representative and ask, what will you do to protect the rights of Arkansans?

Dr. Luis Contreras