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TRUMP PROPOSES 200 PERCENT TARIFF ON IMPORTS FROM CHINA, XI PUSHES
FOR 300 PERCENT
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Dean Baker
August 26, 2025
Center for Economic and Policy Research
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_ Trump's threat of 200 percent tariff on Chinese imports shows a
fundamental misunderstanding of trade. _
,
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 countryhas 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.
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_DEAN BAKER co-founded CEPR in 1999. His areas of research include
housing and macroeconomics, intellectual property, Social Security,
Medicare, and European labor markets. His blog, Beat the Press
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on economic reporting. His analyses have appeared in many major
publications, including The Atlantic, The Washington Post, the
Financial Times (London), and the New York Daily News. Dean received
his BA from Swarthmore College and his PhD in economics from the
University of Michigan._
_Dean previously worked as a senior economist at the Economic Policy
Institute and an assistant professor at Bucknell University. He has
also worked as a consultant for the World Bank, the Joint Economic
Committee of the US Congress, and the OECD’s Trade Union Advisory
Council. He was the author of the weekly online commentary on economic
reporting, the Economic Reporting Review, from 1996 to 2006._
_Dean has written several books, including Getting Back to Full
Employment: A Better Bargain for Working People
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Jared Bernstein, Center for Economic and Policy Research, 2013); The
End of Loser Liberalism: Making Markets Progressive
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for Economic and Policy Research, 2011); Taking Economics Seriously
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Press, 2010), which thinks through what we might gain if we took the
ideological blinders off of basic economic principles; and False
Profits: Recovering from the Bubble Economy
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2010), about what caused — and how to fix — the 2008–2009
economic crisis. In 2009, he wrote Plunder and Blunder: The Rise and
Fall of the Bubble Economy
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Press), which chronicled the growth and collapse of the stock and
housing bubbles and explained how policy blunders and greed led to
catastrophic — but completely predictable — market meltdowns. He
also wrote a chapter (“From Financial Crisis to Opportunity”)
in Thinking Big: Progressive Ideas for a New Era
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Ideas Network, 2009). His previous books include The United States
Since 1980
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University Press, 2007), The Conservative Nanny State: How the
Wealthy Use the Government to Stay Rich and Get Richer
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for Economic and Policy Research, 2006), and Social Security: The
Phony Crisis (with Mark Weisbrot, University of Chicago Press, 1999).
His book Getting Prices Right: The Debate Over the Consumer Price
Index
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M.E. Sharpe, 1997) was a winner of a Choice Book Award as one of the
outstanding academic books of the year._
_THE CENTER FOR ECONOMIC AND POLICY RESEARCH promotes democratic
debate on issues that affect people’s lives, in the US and other
parts of the world._
_Through rigorous, independent research and analysis we strive to
provide the general public and policymakers with the tools to better
understand the problems and choices that they face. CEPR is committed
to presenting issues in an accurate and understandable manner, so that
the public is better prepared to choose among various policy options._
_Toward this end, CEPR conducts both research and public education.
Our research is oriented towards filling important gaps in the
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impact of specific policies. The public education portion of our
mission presents the findings of research, both conducted by CEPR and
others, in a manner that allows broad segments of the public to know
exactly what is at stake in major policy debates._
_CEPR was co-founded by economists DEAN BAKER and MARK WEISBROT.
Our Advisory Board includes Nobel Laureate economist JOSEPH E.
STIGLITZ; JANET GORNICK, Professor at the CUNY Graduate School and
Director of the Luxembourg Income Study; and RICHARD B. FREEMAN,
Professor of Economics at Harvard University._
* Donald Trump
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* Tariffs
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* China
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* imports
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* exports
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