The Real Pain From Trump’s Tariffs Trickles Down to Consumers

For a big country such as the U.S., slapping hefty tariffs on imports can make sense under certain conditions. If many foreign suppliers are competing for sales in the U.S., they could be willing to absorb the cost of a tariff to maintain market share—­sacrificing their own profit margins while the U.S. Treasury pulls in extra tax revenue. The logic of the “optimal tariff” is that “the U.S. is often a large enough importing country that we can throw our weight around,” says Thomas Pugel, an economist at New York University Stern School of Business.

The theory of optimal tariffs, which has figured in economic thinking since the 1840s, fits snugly into the worldview of President Donald Trump, who often says America’s trading partners have taken advantage of the U.S. On Sept. 17 he told reporters, “So China is now paying us billions of dollars in tariffs.” He added later, “It will be a lot of money coming into the coffers of the United States of America.” The truth is more complicated.