From the editor:
We have an in-depth discussion today about tariffs across two Freedom Fund sites. EconLog contributor David Hebert published an article this morning on our sister site Law and Liberty about the impact of America’s new, more protectionist trade policy. This article is a nice complement to today’s EconLog post, “Tariffs won’t shock manufacturing” by Jon Murphy.
From Hebert’s article:
Who really pays the customs duties?
Lin’s central argument remains the fundamental confusion between what economists call the “legal incidence” of taxes and the “economic incidence.” Legally, customs duties are taxes on imported goods, so U.S. importers must write a check to Customs and Border Protection. But this says nothing about who actually pays the duties.
For example, if a landlord’s property taxes go up, who pays? It’s obvious that the landlord will write a check to the county assessor, but unless Lin thinks the landlord is doing charity, that cost will be passed on to the tenant in the form of higher rent, less frequent maintenance, or fewer included benefits (such as utilities or access to designated parking). While the legal incidence falls on landlords, the economic incidence falls disproportionately on renters, young Americans already burdened by high housing costs.
Tariffs work similarly. U.S. Customs and Border Protection bills U.S. importers directly, which is the legal accrual of customs duties. However, the economic burden is spread among U.S. consumers, U.S. importers, and foreign exporters, depending on the specifics of each individual market.
Read Hebert’s full essay here and Jon Murphy’s EconLog post here.
