Donald Trump tries to outdo himself in economic idiocy on a daily basis. While most of us are still contemplating the damage he has done to the United States’ reputation as a country with a stable political environment with his Intel shakedown, his cancellation of a nearly completed windfarm, and firing a Federal Reserve Board governor, we might have missed his latest effort to secure a Nobel in economic stupidity.

Apparently, China is still limiting sales of rare earth minerals and magnets to the United States. I said “apparently” because this is a claim from Trump and, as we know, claims from Donald Trump have only an accidental relationship to the truth.

But the more interesting part of the story is Trump’s threatened retaliation of a 200 percent tax on the goods we import from China. It seems that Trump believes that a huge tax that he would impose on the people importing stuff from China will be even scarier than the 154 percent tax that he was threatening back in the spring.

The point that Trump does not seem to understand, and his advisers are unable to explain to him, is that we pay the tax, not China. There has been much research over the years showing that importers, retailers, or consumers pay the overwhelming majority of the taxes we impose on imported goods, not the other country.

We already have enough data to say that this is very clearly the case with Trump’s most recent tariffs. If other countries were paying Trump’s tariffs, then import prices would be falling. They’re not. They are rising at roughly the same rate they did before Trump imposed his tariffs. Even in the case of China, where Trump has already imposed a 30 percent tax, import prices have only fallen by 2.4 percent over the last year, less than one-tenth the size of Trump’s tax.

Furthermore, it’s not clear Trump’s tariffs are even the reason for the drop in the price of our imports from China. Import prices also fell in 2023. The country has been contending with deflation, which means prices for many items there had already been falling even before Trump imposed any tariffs.

But even if China’s exporters might be willing to bear some of the cost of the tariff at current levels, that willingness is likely to go to zero as the size of the tariff gets higher. The reason is that Trump has made the United States a far less important export market for China.

In 2010, China’s exports to the United States were equal to 6.0 percent of its GDP. By 2024 they were just 2.3 percent of its GDP. For the first six months of this year they were just 1.7 percent. Once tariffs start to approach Trump’s triple digit levels, the only items that the United States will still be buying from China are goods that are simply unavailable anywhere else. While these exports are likely to be relatively unimportant to China’s exporters, they are likely extremely important to the businesses that are willing to pay these huge tariffs to buy Chinese goods.

That is why when Trump threatens to impose a 200 percent tariff on goods imported from China, he is threatening businesses here with extremely high taxes. He is not threatening China.

Unfortunately, Donald Trump apparently cannot understand this simply fact about the way that trade and tariffs work. It is even more unfortunate that top advisers, like Treasury Secretary Scott Bessent and National Economic Council Director Kevin Hassett, are too scared of Trump to explain this to him. From China’s standpoint, the higher the better. If Trump wants to kneecap the US economy, why should President Xi stand in the way.

This first appeared on Dean Baker’s Beat the Press blog.

The post Trump Proposes 200 Percent Tariff on Imports from China, Xi Pushes for 300 Percent appeared first on CounterPunch.org.

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