Trump's Press Secretary Ignorant about TARIFFS

Many people are confused -- notably Press Secretary Karoline Leavitt-- about what tariffs are, how they work, and what history shows us about their impact

Press Secretary Karoline Leavitt is confused about tariffs. In a press briefing held on March 11, she said that “Tariffs are tax hikes on foreign countries.” She went on to say that “Tariffs are a tax cut for the American people.”

Oops! She got that exactly wrong.

Tariffs are not a tax hike on foreign countries. The foreign country or foreign company pays zero when it comes to tariffs.

The importer is the one who pays the tariff. Not the foreign country, not the foreign company, not the foreign producer, not the exporter. That means you are the one paying the 10, 20, 30, 40 or 50% or more on the usual price, if you are the importer, or most likely the company who is importing that product or part of a product.

Contrary to Leavitt’s ignorant statement, history has shown that tariffs act as a type of tax HIKE on the American consumer, who inevitably has to foot the bill for the increased costs involved in importing a product from a country with a US tariff.

“The Canadian and U.S. auto industries have been intertwined for sixty years,” Stanford said. “What happens if they put a 25 percent tariff on all the auto parts and products coming from Canada and Mexico? Some auto parts cross the border eight times before they’re put in the final vehicle.” For instance, some basic steel might be shipped from Mexico to the United States, where it is molded into a car part and then that piece is shipped to Canada where the part is produced, and that part is shipped to Mexico to be installed during final assembly before that car is ultimately sold in the United States.

“The tariffs would apply each time parts cross the border,” Stanford said. “That 25 percent would be compounded on each step. The impact on costs would be astounding.”

When Leavitt’s glaring error was cordially pointed out by an AP reporter, instead of saying, “Sorry, I misspoke” or “Thank you for that correction,” or even “Let me clarify,” Leavitt aggressively, condescendingly and punitively retorted: “I think it’s insulting that you are trying to test my knowledge of economics and the decisions this president has made. I now regret giving a question to the Associated Press.”

Very classy, Karoline.

Turns out, the issue of tariffs is of special interest to me, and not just because I studied international trade and economics while getting my master’s degree in international policy studies.

I’m fascinated by different countries and cultures and have traveled and lived abroad. I’m particularly interested in different political systems and economic policies that promote the greatest amount of prosperity, individual freedom and well-being, with the greatest possibility for peace and stability for people in every country.

A tall order, that’s true. But one worth pursuing.

That leads me to talk about The Tough Truth about Tariffs.

In an upcoming deep dive series, we are going to look at:

- What exactly are tariffs?
- Who pays the tariff?
- How are tariffs paid, when and to whom?
- Who has the authority to impose tariffs?
- What is the purpose, goal or intended objective of tariffs?
- How long do tariffs last?
- What historically has been the result of tariffs?
- Who benefits from tariffs?
- When was the last time the US imposed tariffs?
- Why would a country impose a tariff?
- What do economists think about tariffs?
- Are tariffs bad for the economy?
- Are there other ways to achieve the objective other than through a tariff?
- What are real-life examples of tariffs?
- What are the tariffs Trump wants to impose?

In talking about tariffs, we also need to talk about trade deficits.
- What is a trade deficit?
- What is a trade surplus?
- What sectors are measured in terms of a trade deficit/surplus?
- Why do trade deficits matter?
- Are trade deficits good or bad?
- What is “fair and balanced trade” and does it really matter? Is it realistic?

Finally, let’s look at the concept of free trade, or the free enterprise system.
- What is free trade?
- What is free enterprise?
- Historically, which has resulted in greater prosperity: free trade or tariffs?

In my upcoming series I’m going to provide an overview of these important issues, and in subsequent videos and substacks we’ll do a deeper dive into which markets the US is leading in exports, and to which countries, and why that is; and we’ll look at the sectors where the US is importing the most goods, and from which countries, and why that is.

My Sources and References

My sources and references are broad. I’m drawing from philosopher Adam Smith—known as the father of modern economics — and his important book, The Wealth of Nations, published in 1776 and still as relevant today as it was then. This book is considered a fundamental work in classical economics and the first of its kind to present/describe a comprehensive system of political economy. In other words, how nations build wealth.

I’ve also intensively studied the work of economist Milton Friedman, a libertarian who believes — as I do — in the maximum possible freedom for the individual. Now deceased, he was a prominent figure in the 1970s-early 2000s providing thoughtful, cordial lectures and debates on issues ranging from free trade to government welfare.

Other sources I’ve consulted include the Bureau of Industry and Security (BIS) for export controls, U.S. Customs and Border Protection (CBP) for trade enforcement and border security, International Trade Administration (ITA) for promoting U.S. exports, and the U.S. Census Bureau for collecting and publishing trade statistics. In addition, I’ve gathered data from The Observatory of Economic Complexity (OEC). Another really great resource is from shipping companies who track exactly what is coming in and going out from this country.

Let me know your questions about tariffs in a comment and I’ll be sure to address it in my upcoming series on tariffs.

You may be surprised to discover some of the common misconceptions about tariffs and their impacts.

We also need to question the underlying assumptions related to tariffs such as certain US sectors no manufacturing certain products (yet data show American manufacturing is strong ) the surprising trade SURPLUS the US enjoys when it comes to services, and how tariffs historically have not achieved the stated objectives of a stronger economy, lower taxes and higher wages.

The historical record shows that tariffs hurt local economies and the American consumer, and how there are other more effective methods of achieving a stronger economy, lower taxes and higher wages other than punitive tariffs, which are not paid for by the foreign country or company, but ultimately by you and me. In that regard, tariffs are a roundabout way of raising taxes on Americans, with out congressional approval.

Talking about tariffs will also include a deep dive into the background of Trump’s Secretary of Commerce, Howard Lutnick, the former head of the global financial securities and investment firm Cantor-Fitzgerald with under $13 billion under assets.

Remember Cantor-Fitzgerald and 9/11 (with a direct connection to the Kennedy family)? Yep, Lutnick just happened to not be at work that morning of September 11th. What luck for Lucktnic!

By many accounts, Lutnick forced his way into control of Cantor-Fitzgerald back in the 1990s, on the deathbed of the former CEO Cantor. Apparently there was a heated legal dispute with Cantor’s wife while Cantor was battling a grave medical concern. Lutnick bulldozed his way to become the CEO and president, was widely disliked by the Cantor-Fitzgerald employees, and is known as “The Most Hated Man on Wall Street.”

Yup, that Lutnick is the one championing tariffs tax hikes on the American people. Or does history have it all wrong and this nice grandfatherly figure really has your best interests at heart?

We’ll dive into all that and more.