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Taxing trade – who pays this time?

| Posted by: Paul Donovan | Tags: Paul Donovan Weekly

  • US President Trump has cut the recent trade taxes on US buyers of steel and aluminum. Most of the major exporters to the US are no longer subject to the trade tax. That means that two thirds of the steel tax and over half the aluminum tax have disappeared. With the weaker tax, a six-pack of US-made beer incurs less than three cents of Trump's trade tax. (Buyers of imported beer in aluminum cans do not pay the tax at all).
  • The US intends to tax US citizens who buy things partly made in China. Which things the US government will tax is still not clear. Ordinary shoppers are more likely to notice a tax on buyers of Chinese products than one on steel and aluminum.
  • The way import prices change when currencies move hints at whether it is buyers or sellers who will pay Trump's trade tax. Buyers of foreign-made mobile phones, industrial machines or car parts would probably have to pay most or all of the trade tax. Buyers of foreign-made shoes and furniture are likely to pay less tax. Instead, sellers of those goods will reduce some of their profit rather than make US shoppers pay.