National Economic Council Director Larry Kudlow admitted on Sunday that American importers and consumers would have to pay the tariffs on Chinese imports, completely contradicting President Trump's claims that China pays the duties.
On Fox News Sunday, two days after the US-China trade deal fell apart, anchor and political commentator Chris Wallace pressed Kudlow: "It's not China that pays the tariffs, it's the American importers, the American companies that pay what, is in fact, a tax increase."
"Fair enough," Kudlow responded. "In fact, both sides will pay. Both sides will pay in these things."
Kudlow added, however, it isn't China paying the tariffs, but suggests China's GDP will suffer "with respect to a diminishing export market."
"This is a risk we should and can take without damaging our economy in any appreciable way," Kudlow said.
After much theatrics and 11th-hour negotiation, the US doubled tariffs to 25% on $200 billion in imports from China just after midnight on Friday. Then in an unexpected Friday evening development (after market hours of course) - President Trump began the process of raising tariffs on all remaining imports from China, valued at approximately $300 billion.
"Talks with China continue in a very congenial manner - there is absolutely no need to rush - as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products," Trump tweeted Friday morning. "These massive payments go directly to the Treasury of the US."
And Saturday, Trump hinted that the US was "collecting" tariffs from China.
"Would be wise for them to act now, but love collecting BIG TARIFFS!" Trump said in a tweet.
Trump must be confused about who pays custom duties (or maybe he can't break the news to the deadbeat consumer ahead of an election year), as the US imposes increased tariff rates on Chinese goods. The tax is levied at the time of import and is paid by the American importer of record, and then passed onto consumers.
A new report from Oxford Economics, revealed that the 25% tariff rate on $200 billion in good imports from China would cost the economy $62 billion in economic output by next year, which translates to an equivalent loss of $490 per household.
The research firm estimates that a tariff on all imports from China would cost the economy about $100 billion by 2020, which translates to an equivalent loss of $800 per household.
The announced tariffs have come at a somewhat inconvenient time for the economy.
Economic growth is rapidly decelerating besides Kudlow's bullish propaganda remarks, and the US faces continued headwinds from monetary policy tightening and actual fiscal drag in 2020.
Trump has stated that trade wars are "good and easy to win" and believes tariffs are the only solution to force China to make a deal.
The effects of the trade war are being felt by industries across the country, from farmers in the Midwest to auto manufacturers in the Rust Belt.
Senator Rand Paul told host George Stephanopoulos on Sunday that he's "very concerned" that the trade war will depend and end up hurting consumers, farmers, and manufacturers.
"I know of a big company that told me that the tax cuts specifically helped them but that the tariffs are almost equal in punishing them," Paul said, referring to the Republican-led tax overhaul passed in 2017. "The farmers in Kentucky are concerned about the tariffs, and I've talked to the administration about this. . . . The longer we're involved in a tariff battle or a trade war, the better chance there is that we could actually enter into a recession because of it."
Henry M. Paulson Jr., who was treasury secretary under President George W. Bush, spoke with "Face the Nation" on Sunday and said, "we don't have many good tools" to pressure China into a deal but warned tariffs aren't an ideal choice.
"They're a tax on the American consumer," said Paulson. He added: "Will it hurt us? If this persists too long, it will. There'll be a cost to it."
If President Trump ever admitted to his base that they were the ones paying the tariffs, not the Chinese, well, his base would be in an uproar, could jeopardize his 2020 run. So in the meantime, President Trump is keeping the American people content with fake news tweets while slowly pushing out Kudlow to spill the beans.