Trump’s economists say the darndest things 

President Trump’s economists, and sometimes Trump himself, often remind me of the late TV celebrity Art Linkletter, who used to have a segment on his television variety show called “Kids Say the Darndest Things.” Linkletter would ask children questions, and some of their responses were inadvertently hilarious, which shocked Linkletter and made his audience laugh.

That’s increasingly what we’re seeing from some of Trump’s economists when they try to defend the president’s tariff and trade policies.

Take, for example, Stephen Miran, the head of Trump’s Council of Economic Advisers. The Harvard-trained economist recently tried to explain to Politico reporter Victoria Guida why the president’s tariff policies could result in little or no price increases for U.S. consumers and businesses. 

According to Guida, “At the center of his [Miran’s] argument is the idea that the U.S., as the dominant buyer of the world’s goods, will ultimately have enough leverage to make foreign trading partners eat the cost of tariffs…” Guida adds, “Foreign manufacturers will have to lower their prices to accommodate tariff rates, Miran believes.” 

Miran apparently thinks that, to be competitive with manufacturers in other countries, some companies will lower their prices so that U.S. companies’ after-tariff price would be roughly equal to the price they would face if there were no tariffs.  

At least Miran understands that U.S. businesses and individuals, not foreign-based companies or countries, pay the Trump-imposed tariffs. As the Tax Foundation reminds us, “When the U.S. imposes tariffs on imports, businesses in the United States directly pay import taxes to the U.S. government on their purchases from abroad.” 

Trump has had some trouble grasping that Americans pay the tariffs he imposes on other countries. Trump said on Truth Social a few days ago when he ended trade talks (which are now on again) with Canada, “We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period.” 

What Trump should have said is he would let Canada know how much extra Americans would be paying for Canadian products. 

The Tax Foundation concedes that others besides U.S. businesses could bear at least a portion of the cost of tariffs — usually when businesses pass on the cost of tariffs in higher prices. Some companies have taken that step, but others have held off, hoping the tariff chaos will end soon. 

The Tax Foundation also mentions that some foreign exporting companies may lower their prices to offset some of the tariff costs to U.S. business and consumers — which is what Miran is predicting. 

But many of Trump’s tariffs are the highest they’ve been in the post-war era, and those companies won’t be able to “eat the cost.” 

Take a simple example: a U.S. business buying an item from a foreign company that costs $1,000. If that’s steel from Canada, there’s a 50 percent tariff. Thus, the U.S. company buying the steel will (as of now) pay the Customs Bureau $500 before the U.S. government will release the steel — for a total cost of $1,500. 

The Canadian steel producer might try to absorb some of the impact of the steel tariff by reducing its price, perhaps by, say, 10 percent, to $900. But when the now-$900 steel item arrives in the U.S., customs will charge the purchaser 50 percent, or $450. So now the product costs $900 plus a $450 tariff, for a total of $1,350. That may help the U.S. purchaser a little, but he would still be paying about a third more than he otherwise would without tariffs.  

Canadian steel manufacturers would have to reduce their prices by more than 30 percent to ensure the after-tariff price is roughly equivalent to the price if no tariffs had been imposed. Not many companies can reduce their prices by 30 percent for long.  

To be sure, companies in countries facing a 10 percent Trump tariff might be able to “eat the cost” by lowering the price. But even if they did, American businesses and consumers are still paying tariffs on the lower-cost products.  

Another glitch in Miran’s trade theory: In some cases, there is no competition from multiple companies, especially when specialty items are concerned. We learned this recently when China decided to play trade hardball by halting shipment of rare earth minerals, putting Trump and a number of U.S. manufacturers in a bind. Switching to another country’s vendors isn’t always an option. 

Trump’s on-and-off tariff spats have forced many of his economic advisors to become very creative, and sometimes contradictory, in finding ways to justify the president’s actions. Just like Art Linkletter’s kids, Trump’s economists will say the darndest things. Only in this case, U.S. businesses and consumers aren’t laughing. 

Merrill Matthews is a public policy and political analyst and the co-author of “On the Edge: America Faces the Entitlements Cliff.”