Do tariffs — taxes on imports — raise prices for U.S. consumers? There’s really no debate on the subject.
I don’t mean that everyone agrees. Rather, there are two distinct groups that aren’t talking to each other, each of which is more or less unified in its views. Almost all economists agree that taxes on imports are, in fact, passed on to consumers. Why? Because that’s what the evidence says, and it’s very hard to come up with an alternative story.
On the other hand, Trump loyalists — which these days means almost the entire Republican Party — insist as a group that foreigners, not American consumers, pay taxes on imports. Why? Because Donald Trump says so. And they don’t even try to engage with economists who disagree.
As I see it, the latter position is the more interesting of the two, not because it has a shred of validity — it doesn’t — but precisely because it doesn’t. How did we get to a state in which a whole political party supports a claim that experts unanimously reject? As I see it, the best way to understand what’s going on is to look at other countries’ histories — specifically the strange history of Lysenkoism in Joseph Stalin’s Russia.
Just for the record, the case for the orthodox economists’ view is basically that taxes on imports are like taxes on anything else. If we were to require that car dealers — an extremely Republican group — pay a tax equal to 20 percent of the price of every car they sold, they would be the first to insist that this tax would lead to higher prices for their customers. Why would anyone imagine that a tax on goods sold by foreigners would have a different effect?
And studies of the effects of past tariffs say exactly what you’d expect: They’re passed on to consumers.
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