Companies in the US are paying almost all the costs from US President Donald Trump’s tariffs on Chinese imports, IMF researchers said in findings that contradict the president’s assertions that China is footing the bill.
IMF on Thursday said in a blogpost that researchers found “tariff revenue collected has been borne almost entirely by US importers.”
“Some of these tariffs have been passed on to US consumers, like those on washing machines, while others have been absorbed by importing firms through lower profit margins,” they said in a report.
The report concludes what most private economists have argued for months: China does not pay US tariffs, US consumers and companies do.
“Consumers in the US and China are unequivocally the losers from trade tensions,” the researchers said.
It is rare for the IMF to disagree with its largest shareholder, and the reporter was released just as the rhetoric in Trump’s trade war with China reaches a boiling point.
“For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods,” Trump said on Twitter on May 5.
Trade talks between Beijing and Washington this month stalled as Trump accused China of backing out of a deal that was taking shape.
In response, Trump increased levies on US$200 billion of Chinese imports from 10 percent to 25 percent, prompting retaliation from Beijing.
A separate report from researchers at the Federal Reserve Bank of New York released on Thursday said that the US’ 15 percentage point increase in tariffs would result in an annual cost of US$831 per US household, about double the bill on Trump’s tariffs last year.
The US has also released a list of about US$300 billion of Chinese goods that could face additional tariffs, including clothing, toys and mobile phones. Those levies, if imposed, would cover essentially all Chinese imports and hit a broader swath of US households.
Earlier this month, US National Economic Council Director Larry Kudlow acknowledged that “both sides will suffer” from the widening US-China trade war, saying that the impact on US jobs and growth from higher tariffs on Chinese goods would be “de minimis.”
On Thursday, China blamed Washington for wrecking the talks and insisted that the US must alter its “wrong practices” before negotiations can resume.
Financial markets have been slumping amid prospects for a long dispute between the world’s two largest economies.
Cowritten by IMF chief economist Gita Gopinath, the report said a trade war that escalates with all the threatened tariffs would subtract about one-third of a percentage point from global GDP, “with half stemming from business and market confidence effects.”
“This type of scenario is among the reasons why we referred to 2019 as a delicate year for the global economy,” the IMF economists wrote.
The IMF last month reduced its forecast for global growth this year to 3.3 percent, the lowest since the financial crisis, citing higher tariffs weighing on trade and weakness in some advanced economies.
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