Foreigners and their firms are the ones mostly paying for the Trump administration’s trade tariffs not Americans, Federal Reserve Governor Stephen Miran said this week, arguing that the administration’s policy has proved more benign than many had feared.
Reuters reported, however, that the comments by Miran, who was appointed by President Donald Trump last year to fill an unexpected vacancy on the Fed’s Board of Governors, appeared to contradict data showing that Americans bear the burden of paying for tariffs.
“I think the world has been coming in my direction on a number of issues,” Miran said at an appearance at the Boston University Questrom School of Business. Miran pointed to tariffs and their impact on the economy and noted that a year ago, at the start of the second Trump administration, there were widespread fears that the import tax surge would damage the economy.
“I think very gradually over time” many experts have “been moving in my direction” and see that the impact of the tariffs has been “quite muted” in terms of what they’ve done to the economy, Miran said.
Who Pays the Cost of a Tariff?
Miran also disputed a widespread view in the economics community that tariffs are paid for by Americans in the form of higher prices, rather than by the exporting nations by way of lower profit margins.
The suggestion that tariffs would not be paid by Americans was a key element of the Trump administration as it started its aggressive trade actions against a wide range of countries, including America’s closest allies.
Reuters said that Trump even acknowledged late last year that Americans were facing higher prices because to his tax increases, saying that while the policy was a net positive for the U.S. economy, “I think that they might be paying something.”
According to Reuters, The Fed has said that a notable part of inflation overshooting the 2% target this year is because of tariff pressures, even as many officials have also noted that tariff impacts have proved more muted than expected and likely represent a one-time increase in the price level that will not lead to lasting inflation gains.
Research puts the burden of paying most of the tariffs on Americans, Reuters reported, with the Yale Budget Lab saying in a report, opens new tab from late last month that the annual median cost of the taxes stands at around $1,400 per household.
U.S. Subsidiary of Foreign Company
Miran said accounting issues appear to camouflage the real burden of the tariffs.
In data, “it looks like a U.S. entity is bearing the burden, but it’s actually just the U.S. subsidiary of a foreign company,” Miran said.
“It’s entirely inappropriate to say that we can conclude from those data…that U.S. agents are bearing the burden of the tariff, because some of those companies are actually subsidiaries of foreign companies,” he said.
Miran was a top economic adviser to the Trump administration before joining the central bank, and until recently, he was on leave from the White House while serving at the Fed.
Miran said that tariffs joined with other changes in government policy are helping to improve the longer-run outlook for government finances. “Tariff revenues are going to be significant in terms of reducing the primary deficit,” he said.
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