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Kudlow Admits Trump’s Tariffs Will Hurt Both Sides as China Slaps Tariffs on U.S. Goods

Kudlow Admits Trump’s Tariffs Will Hurt Both Sides as China Slaps Tariffs on U.S. Goods

“In fact, both sides will pay. Both sides will pay in these things.”

Tariffs suck. They do not work and will only cause harm for the manufacturer and consumer.

President Donald Trump’s economic adviser Larry Kudlow broke from his boss on Sunday when he agreed that tariffs would hurt both the US and China after Trump increased tariffs.

To make matters worse, China imposed tariffs on $60 million worth of US goods on Monday.

Kudlow: “Both Sides Will Suffer”

On Fox News Sunday, host Chris Wallace mentioned to Kudlow that Trump insisted the country “can take in $120 billion a year in tariffs, paid for mostly by China, by the way, not by us. A lot of people try to steer it in a different direction. It’s really paid – ultimately, it’s paid for by – largely by China.”

Wallace pointed out this is not true, which Kudlow admitted:

“But, Larry, that isn’t true,” Wallace told Kudlow. “It’s not China that pays tariffs. It’s the American importers, the American companies that pay what, in effect, is a tax increase and often times passes it on to U.S. consumers.”

“Fair enough,” Kudlow said. “In fact, both sides will pay. Both sides will pay in these things.”

Last week, Trump’s administration “increased the taxes on $200 billion worth of imported Chinese goods from 10% to 25% and started the process to impose tariffs on all remaining imports from China, approximately $300 billion of goods, last week to try to pressure China to reaffirm previous pledges made previously in trade talks.”

Despite the fact that Kudlow admitted the truth, he explained to Wallace the risk is worth it since our economy continues to grow stronger.

As Kudlow spoke on Fox News, Sen. Rand Paul (R-KY) expressed his disgust for tariffs on ABC’s This Week. From Fox News:

“I know of a big prominent company in Kentucky that said the tax cuts significantly helped them, but that the tariffs are almost equal in punishing them,” Paul said during an interview on ABC’s “This Week.” “I’ve talked to the administration about this, I said the great benefits of the tax cut, which has low unemployment and incredible economic growth, could be erased by this tariff war.”

Paul added: “The president is playing a negotiating battle with the Chinese and I think he thinks at this point he can’t back out…but I still have advised the administration: get this done, because the longer we’re involved in a tariff battle or a trade war, the better chance there is we could actually enter into a recession because of it.”

This isn’t hard to understand. In order for someone to stay in business they have to make a profit. If they have to pay more in taxes they will raise prices on products, which goes to the consumer.

Others agreed with Paul while effects of tariffs have already shown up:

China’s Tariffs

In response to the tariffs on $200 billion of goods, China slapped its own tariffs on $60 billion on US goods, which includes animal products, frozen produce, seasonings, baking condiments, chemicals, and vodka. This is an increase of 20% to 25% from 10%.

China does not have the ability to match our tariffs because they do not import anywhere near what we import from them. China also “did not specify the dollar value of goods in each of the four categories.”

From The New York Times:

American companies are fearful that China might resort to other methods to retaliate, beyond tariffs. Hu Xijin, the well-connected chief editor of the Global Times, a tabloid directly owned by the Chinese Communist Party, tweeted on Monday evening that China might halt purchase of American agricultural and energy products and Boeing aircraft and restrict offerings of American services in China. He also cited unidentified Chinese scholars who had speculated that China might sell some of its large holdings of Treasuries.

The question now is whether another round of tit-for-tat tariffs cements a prolonged economic struggle between the United States and China. Since Mr. Trump was elected, the two sides have repeatedly seemed close to a deal only for it to fall apart. Commerce Secretary Wilbur Ross seemed to have the outlines of a deal in 2017. Treasury Secretary Steven Mnuchin talked of a deal being at hand a year ago.

However, both sides have a small window to come to an agreement. The Chinese tariffs will not start until June 1. Ours kicked in last Friday.


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healthguyfsu | May 13, 2019 at 1:12 pm

Both sides will suffer. Both sides will concede something and it will be a net improvement for the U.S. over previous policies of appeasement and being a doormat diplomatically.

I don’t expect the media to point out this logical conclusion, though. Hyperbole abounds.

The media conveniently neglects to mention the fact that the Chinese have a lot more to lose than the U.S., and their stock market shows it. Yes, tariffs are bad, but I have yet to see anyone explain how the U.S. can even the playing field without actually evening the playing field. Maybe we could ask that economics genius ocasio-cortez.

I clearly remember Reagan’s economic reforms….short-term pain, then the longest sustained economic boom in U.S. history. When Bush agreed with the dems on tax increases, he lost his job.

    herm2416 in reply to bear. | May 13, 2019 at 2:58 pm

    They need us way more than we need them. If you don’t want to feel the China tariffs, DON’T BUY FROM CHINA! Better yet, don’t manufacture in China, your company won’t feel the heat when the product returns here for purchase.

    stl in reply to bear. | May 13, 2019 at 4:04 pm

    Yep. I’m no economic genius but the existing situation with China was becoing intolerable- they were fleecing us financially and technically. Second, the economic doomsayers forget that US manufacturing will rise, increasing employment and wages. Most are only looking at the short term pain. The “Free market” is great, only if all countries play far. China hasn’t been playing fair for some time.

JusticeDelivered | May 13, 2019 at 1:23 pm

This needs to be done, China has been stealing from America on a grand scale. Economic fallout is rapidly increasing. Trump is right to do this.

Failure to address this issue will leave us a second rate country with poor economic prospects.

No one is required to buy Chinese products. The only time one pays for the tariff is if one buys a Chinese product.

Harley tried to claim the tarifs were hurting it but the fact is, Harley made a CHOICE to buy goods that were covered by the tariff.

The whole idea of a tariff is to force the consumer to buy untariffed goods such as American made. Which frankly right now is a good thing.

And if you don’t buy Chinese stuff you won’t be paying the tariff.

Who is hurt is the Chinese as they won’t sell as much goods to the US.

It’s really simple but then so is the American Media. And it’s pols.

    healthguyfsu in reply to jakee308. | May 13, 2019 at 1:42 pm

    I’m gonna have to correct you here.

    The truth is tariffs are not a tax in the strictest sense. However, they do increase the cost of living for the consumer.

    In the law of supply and demand, demand will likely drop for the goods under tariff. That may or may not cause price to drop on these items (because of supply side changes). Meanwhile, demand increases for the non-tariff, domestic goods raising their prices and increasing cost of living.

    One of the economic reasons for the civil war was the implementation of cost-raising tariffs protecting the domestic, industrial revenue of the North with no balance of tariffs protecting domestic, agricultural revenue in the South.

      The letter from John Calhoun to Virgil Maixy c. 1830 utterly destroys the Tariff Myth Theory. That’s your own man unhorsing the Myth, not some damned “Yankee ‘Norther’s” feeble script.

      The “peculiar institution” of slavery was the primary and foremost cause of the Southern Arstocracy’s nullificationism – leading to the wholesale slaughter of Americans. The boys that got fed into meatgrinders before and after the war of southern aggression? Yeah. They never mention tariffs as the motivating factor. They mention everything but tariffs.

      I routinely see this dopey justification of war coming from Texans. Why? I’ve no idea.

        Valerie in reply to Tiki. | May 13, 2019 at 3:03 pm


        Because some people have bothered to educate themselves.

        Oversimplifying history tends to result in foolish current policy.

        As for the Texans, Texas was barely touched by both slavery and the Civil War. Tariffs, however, did affect them. You missed an opportunity to learn about the substantial differences between Texas and the other “southern” states when you failed to open your mind enough to hear what they had to say.

          healthguyfsu in reply to Valerie. | May 13, 2019 at 3:26 pm

          He also failed to comprehend my post regarding the part that says “one of the economic reasons for the civil war…”

          I see the white knight in him spurred to action without comprehension. My opening words in that statement were certainly meant to dispel any notion that tariffs are said to be the only or even the main reason for the civil war.

          Colonel Travis in reply to Valerie. | May 13, 2019 at 4:42 pm

          As a Texan, I just want to say this about slavery: in 1860 close to 1/3 of the entire state population was slaves. And if you compare the Texas Ordinance of Secession with, say, the Va. Ordinance of Secession, the Texas document is 25 paragraphs long and slavery is mentioned in most of them. “Tariff” or “tax” is never mentioned. The Va. document is four paragraphs long and slavery is mentioned once. Texas left the union over slavery, that was the principle reason. In fact, the Texas Ordinance of Secession is written like the second part of the Declaration of Independence, just replace King George with non-slave states and most the grievances have to do with slavery.

          But I’m with you in that I am not a fan of oversimplifying history, and I have no clue why Tiki blew by healthguyfsu’s comment to talk about slavery or why Texans were singled out. You cannot talk about the history of Texas before, during, or after the Civil War without slavery and no one that I know skirts around it.

          I don’t know how bad tariffs affected Texas. If I had to guess, I would say the blockades were the biggest problem when it came to trading and selling, but Texas could trade and sell to Mexico, and after that goods could go elsewhere. No other confederate state had that kind of advantage, and it was a huge advantage. As you said, there weren’t many battles here (the last one of the war, fought after the war was officially over, was near the Rio Grande – if you ever get a chance to visit you should go, it’s in the middle of nowhere but close to a beach to make it worthwhile.) So Texas was spared a lot of the devastation that the rest of the Confederacy could not escape, and their economic relationship with Mexico let Texas build up industries, not like the North, but the rest of the South was getting pummeled and couldn’t build much of anything.

          Anyway, this history geek couldn’t help but jump in.
          That is all.

          Mac45 in reply to Valerie. | May 14, 2019 at 1:28 am

          When one discusses the American Civil War, one has to separate the reasons for secession and the reasons why the North engaged in the invasion of the South.

          The reasons for the Confederate states secession were two fold. While both were economic, one was also social/political.

          The most important one was the issue of slavery. The abolition of slavery would have been detrimental to the powerful economic interests of the South. These interests were mostly large agricultural interests whose business depended upon the existence of relatively cheap, captive labor. The social/political component to abolition was the effect of 1/3 – 1/2 of the population being comprised of people who were unwilling captives of the rest of the population and who could be expected to be hostile to their former masters and those who supported their enslavement. It would have totally changed the existing society and power structure.

          The second reason for secession, possibly more important, was the imposition of tariffs. In the years leading up to the Civil War, Northern interests managed to get substantial tariffs passed on manufactured goods imported from Europe. raw materials from Europe were imported without tariffs. This benefited Northern manufactures at the expense of the agricultural South. Then the Northern interests doubled down by imposing export tariffs on Southern agricultural products, such as raw cotton. At the time of the secession, tariffs accounted for 90% of the operating funds of the federal government. And, virtually all of them were collected from Southern businesses.

          Now, we come to why the Was of Secession was fought. When the Southern states seceded, they took the bulk of the foreign trade with them. More importantly, as a sovereign nation, they could drop the import tariffs, making European manufactured goods far cheaper than Northern manufactured goods and depriving the Northern manufacturing interests of a near captive market for their goods. The manufacturing nations of Europe hardly needed the manufactured goods of the US. The North had to regain control of the South, or go broke. There was also the danger of having a sovereign nation, on its southern border, which would also be expanding to the west.

          While the abolition of slavery was touted as the reason for the Civil War, it was really more about economics. The South coulld get along without the North, but not vice versa.

        Barry in reply to Tiki. | May 13, 2019 at 9:20 pm

        The facts utterly destroy the myth that “The letter from John Calhoun to Virgil Maixy c. 1830 utterly destroys the Tariff Myth Theory.”.

        The facts are that the United States government was funded by import duties and 85% were paid by the southern states. The southern sates received back from the federal government in spending about 15%. See the problem? Lincoln ran on and congress delivered on raising the tariffs to a level that would destroy the southern economy. Why?, because the southern economy was an export – import economy. Southerners exported ships full of commodity items like pitch, turpentine, ship timbers, and cotton. Those ships traveled to Europe where the goods were sold and unloaded, then the ships were filled with manufactured goods and came back. Once the higher tariffs went into effect, the ships could not sell the return trade goods at a profit. The whole system would collapse. The northern manufacturers wanted high tariffs to force the southerners to purchase their goods.

        Read any of the European writings about the civil war at the time and you will find it uniformly acknowledged the war was being fought over the tariffs. An exception here and there of course.

    healthguyfsu in reply to jakee308. | May 13, 2019 at 1:51 pm

    “Who is hurt is the Chinese as they won’t sell as much goods to the US.”

    This is also incorrect because of the retaliation. Both sides will feel a sting. Our investment and markets will get a pinch, production will likely take a hit, etc. It would also be unwise to fight this battle on two fronts such as EU and China if that became a a thing.

Tariffs can compensate for environmental and labor arbitrage, monopolies and other practices, and other premeditated efforts that undermine free markets and development.

There has been a suggestion to use revenue from tariffs as charitable donations or investments in second and third-world nations (e.g. emigration reform).

    healthguyfsu in reply to n.n. | May 13, 2019 at 1:52 pm

    Corporate relief targeting those affected by retaliatory tariffs would be much better.

Dejectedhead | May 13, 2019 at 2:02 pm

It seems like 2 things are constantly missed in all of this talk of tariffs:

1. The disproportionate trade between the US and China. The ability of the USA to harm Chinese industry is far greater than China’s ability to harm the US economy because they have an export driven economy largely reliant on the USA.

2. Tariffs will make Non-Chinese producers more competitive. US manufacturing will benefit from the new price point, as well as other economies that are more friendly to the US interests, such as Taiwan, South Korea, Japan, and Canada.

The US is in a position of power here and we are not dependent on Chinese goods for the most part.

Close The Fed | May 13, 2019 at 2:26 pm

I spoke with a man who’s involved in a plastics industry. On a trip to China, software they were using came from the West and cost him $60,000 for each terminal that used it. In China, they showed him at a corner store he could buy it for $1.00.

I don’t give a rat’s ass if we’re “hurt” by tariffs. China does not respect anyone else. They steal from us and are thrilled to do it.

Screw them, and screw them hard.

    gonzotx in reply to Close The Fed. | May 13, 2019 at 2:58 pm

    Wow, $60,000 vs $1.00

      Close The Fed in reply to gonzotx. | May 13, 2019 at 3:05 pm

      Exactly. So they could afford to have dozens and dozens of terminals working. The American could only afford a handful. What crap.

    Barry in reply to Close The Fed. | May 13, 2019 at 9:24 pm

    While I can’t vouch for that particular example, I can verify that expensive software in the west is sold for a pittance in China.

    The Chinese teach and deploy code hackers to steal intellectual property.

I hate tariffs with a passion.

That is why I fully support Trump’s tariffs on Chinese goods.

How does that make sense?

Because unilateral free trade policy in the face of tarrifs on goods we exports is the dumbest policy I can think of.

Trump’s goal is not permanent tariffs. Trump’s goal is equilateral trade partnerships. If you want to sell goods in the US, then your trade policy has to treat our goods like we treat yours.

There is nothing dumb about that. There is nothing malicious about that. It is sound policy, and it has been disregarded for decades. No longer.

Connivin Caniff | May 13, 2019 at 2:36 pm

Although I admire Trump for not kicking the can down the road, like all the globalists before him, the Chinese regime can hold out better than our dysfunctional divided society. However, I think he should have done this, as it has to be done, but he should have waited to the beginning of his 2d term.

The question now is whether another round of tit-for-tat tariffs cements a prolonged economic struggle between the United States and China.

And why would it?

China does not have the ability to match our tariffs because they do not import anywhere near what we import from them.

There’s the answer. A tit-for-tat strategy is a strong losing move for China.

With Trump Tariffs, China can still sell prodigious quantities of stuff to the US; it just can’t do it quite as cheaply as at present.

Of course tariffs are a restraint on trade. That’s the whole idea. And they raise consumer costs. Obviously.

It’s short-term cost vs. long-term gain. Assuming the government doesn’t mismanage it and screw everything up, as usual.

The fact that these negotiations are about a lot more than some tariff imbalances seems to have gotten lost in the hysteria. Forced technology transfer and theft, and a refusal by the Chinese to abide by previous agreements and treaties would seem to me to be a far greater problem than a tariff imbalance.

    Close The Fed in reply to txvet2. | May 13, 2019 at 3:07 pm

    Exactly, TxVet2. Exactly. Loran Technology anyone? I mean that’s one drip out of an ocean.

I’m looking forward to getting vanity lightbulbs for my kids’ bathroom that don’t catch fire.

I have tried to find US-made light bulbs after I had two of them catch fire. They are all made in China, regardless of the brand.

Also, none of them have the lifetime printed on the packaging.

stevewhitemd | May 13, 2019 at 3:27 pm

The “muh principles”, anti-tariff crowd who proclaim that they are in favor of “free trade” forget one thing —

— we don’t have free trade.

We’re not even close to free trade. What we have at a global scale is managed trade. NAFTA isn’t about free trade, it is thousands of pages of rules that manage trade between the US, Canada and Mexico. Ditto our trade agreements with other countries. There’s nothing ‘free’ about any of them. You want to trade with these countries? You’d better follow the rules.

So Donald Trump isn’t trying, and wouldn’t even consider trying, to get us to ‘free trade’. I don’t think he believes in free trade. What he does believe in is a good deal, and right now, he correctly sees that we have a rotten deal with China. So there’s nothing wrong with putting the screws to China to force a better deal.

Yes, the US will take some short-term pain. Trump believes (here again, I think he’s right economically, though he may be wrong in terms of politics) that we can handle the pain better than China. China has a shifting, soft economy that is propped up by a lot of dirty dealing. They’re communists, remember, and they don’t have rule of law in China. They still have a growing population and one that has rising expectations. Their economy has feet of clay.

Mr. Trump is betting that they blink first. I’m not sure he’s right, but I’d like him to be right.

notamemberofanyorganizedpolicital | May 13, 2019 at 3:51 pm

Must See!

Standing up to China

The US holds ALL of the big important cards in this war. China is raising tariffs on the very few imports it allows from the US. WE are raising tariffs on their sizable, heavily subsidized exports to the US. These tariffs are already bleeding them white.

Manufacturers are LEAVING China and that will only increase as the world gets it through their thick skulls that Trump means what he says. If they move out of China, preferably to the US as many are doing, they avoid the tariffs. Good for US. Very bad for China.

So far, tariffs have not hurt the US. Even companies like Cummins, Inc. that supposedly depend on China for their profits are doing very well as the US re-industrializes. Despite their constant whining about the tariffs, CMI’s profit growth was almost entirely from its US operations last quarter.

China can only win if we quit. A weak-kneed, spineless US citizenry is China’s only hope. Keep in mind that Chinese citizens are moving their money out of China as fast as possible, largely to the US. What does that tell us about what they think about their future? Are Americans moving their money to China?

Tariffs don’t work? Someone isn’t doing their homework. Suck it up buttercup. Yes, it is uncomfortable and will require sacrifice. But surrendering is NOT an option.

Mt step-daughter has degrees in Chinese and Public Policy from Beijing University.

She voted for Hillary in 2016. She will be voting for Trump in 2020..because he is “that right about China”.

Trump just has to keep tweeting and holding rallies, to spread the word on the tactics that the media won’t share.

After dealing to China Trump will then be free to deal to the EU.

In fact tariffs hurt the country that imposes them worse than they hurt the country against which they’re imposed. Trump’s tariffs hurt Americans worse than they hurt Chinese people, and China’s tariffs hurt Chinese people worse than they hurt Americans. That’s why even unilateral free trade is almost always a better policy than retaliating against foreign tariffs.

    Barry in reply to Milhouse. | May 13, 2019 at 9:28 pm

    There is exactly zero evidence for your opinion.

    Barry in reply to Milhouse. | May 13, 2019 at 10:14 pm

    “unilateral free trade”

    oxymoron alert

    That’s just funny.

    Mac45 in reply to Milhouse. | May 14, 2019 at 1:47 am

    While tariffs CAN harm the nation which imposes them more than the nation upon which they are imposed, in this case that is not true. If it were, then China would not have any tariffs at all. However, China has, until recently, had far higher tariffs, taxes and restriction on goods imported from he US, than the US has had on imported Chinese products.

    The current US tariff increases are simply leveling the import playing field. It is allowing US manufactured products to be competitive with Chinese manufactured products. Will this increase the cost of imports to consumers in both countries? Yes. However, due to the far greater consumer market represented by the US, along with the far greater depth of the US economy, the US can weather the price increases far better than China can. When you factor in the increase in the US manufacturing sector, which should provide increased employment and wages, which provides for a greater market for US produced goods and services, the US actually benefits from the tariffs.

    Actual free trade only works when all trading partners are equal. As that never happens, in real life, some method of trade control always exists.

Quick mention. I only just read the real-world reason why the trade deficit worsened after the 10% tariff wave last year. China devalued its currency more and so Chinese imports (as a whole, since the tariffs weren’t on everything) were actually cheaper than when they started.

Took me an entire year to hear about it. But I’m not trying to be a finance guru or an expert on the issue. It’s just an interesting fact I was not aware of until now.