Here’s how the current tariffs on goods coming into the US from China work: taxes are applied on goods coming in, and American importers are the ones responsible for paying them. Some absorb the cost; most pass them onto the consumer.
That’s not to say that both countries don’t suffer. These tariffs make consumers (and importers) less likely to purchase Chinese goods, hitting exporters and, in turn, Chinese GDP. Reciprocal tariffs, like those imposed on struggling US soybean producers, hurt US exporters too, even while their effect on overall GDP has so far been negligible.
US president Donald Trump doesn’t seem to have a perfect handle on the state of play. In a series of typically bombastic tweets yesterday, the commander-in-chief threatened to impose still more damaging tariffs in time, before noting that he loves “collecting BIG TARIFFS.”
The tweets followed weeks of stop-start negotiations, eventually culminating in Trump hiking tariffs on US$200 billion of Chinese goods from 10% to 25% on Friday.
As time goes on, however, China is increasingly looking elsewhere for trade partners, while the US is part-victim of its own policies. A trade war is afoot—and there are casualties on both sides.