These comments (reported by Bloomberg’s Nancy Cook) were . . . bold.

“The notion that tariffs are a tax on US consumers is a lie pushed by outsourcers and the Chinese Communist Party,” says Republican National Committee spokesperson Anna Kelly.

An import tariff is not, of course, a direct tax on U.S. consumers, but when trying to understand a tax (and no one, I hope, denies that tariffs begin life as a tax), it is perfectly normal to look at where the economic burden imposed by a tax ultimately ends up. Critics of corporate-tax increases (rightly) look at their negative effect on wages and prices and so on.

The same is true of tariffs. They are typically paid by the importer, but the importer may, if its competitive position allows, pass on that cost to its customer. If that customer is a consumer, he or she will pay a higher price. The tariff has operated as a de facto tax. A higher import price may also allow domestic producers of equivalent products to keep their prices higher than otherwise would have been the case, which also operates as a kind of tax on the consumer. Something similar applies when the tariff is on a raw material or component imported by an American manufacturer. Again, if the competitive position allows, the importer will pass on the cost of the tariff to the manufacturer, and, if its competitive position allows, the manufacturer will then pass on the increased cost to buyers of the end product.

Here’s a good note (dating from 2019) from the Heritage Foundation, not an institution normally seen as a lackey of the Chinese Communist Party, on tariffs and quotas. The author’s first takeaway: “Tariffs are taxes on Americans. . . .”

The full report is, incidentally, well worth reading for its consideration of tariffs’ adverse knock-on effects.

By dint of having died in 1790, Adam Smith missed the opportunity of being won over by sly words from Beijing or American outsourcers. Nevertheless, in The Wealth of Nations, he had no problem explaining how a tariff could be seen as a tax (emphasis added):

When our neighbours prohibit some manufacture of ours, we generally prohibit, not only the same, for that alone would seldom affect them considerably, but some other manufacture of theirs. This may no doubt give encouragement to some particular class of workmen among ourselves, and by excluding some of their rivals, may enable them to raise their price in the home-market. Those workmen, however, who suffered by our neighbours prohibition will not be benefited by ours. On the contrary, they and almost all the other classes of our citizens will thereby be obliged to pay dearer than before for certain goods. Every such law, therefore, imposes a real tax upon the whole country, not in favour of that particular class of workmen who were injured by our neighbours prohibition, but of some other class.

Smith, an early supposed “market fundamentalist,” who, like just about every other supposed market fundamentalist, was nothing of the sort, accepted that there were cases when tariffs could be justified, notably in the case of strategic industries (“when some particular sort of industry is necessary for the defence of the country”), but in other cases too.

However, as a realist, Smith would, after time-traveling to the U.S. in 2024, have expected that many, many domestic manufacturers would do their utmost to have themselves declared, often on distinctly dubious grounds — enter the lobbyists — as “strategic.” I suspect that he would have thought that many strategic concerns could be satisfactorily addressed by friendshoring, nearshoring, or some combination of both. He would, I reckon, also have recognized (as do I) that special considerations should apply when it comes to trading with China, an increasingly dangerous rival and a mercantilist state to boot.

But if those considerations included the imposition of tariffs, Smith would have wanted it made clear why such tariffs were a tax worth paying rather than for their advocates to deny that that’s what they were. Equally, while he would, to say the least, have been skeptical about the use of tariffs to protect an internationally uncompetitive industry, he would have insisted on a proper cost–benefit analysis of any such policy, in which, again, tariffs were recognized as taxes. Smith was not for obfuscation.

Another proposal floated by Donald Trump has been to replace the income tax with tariffs. Tariffs were often a primary source of revenue for governments in Smith’s era and for a long time thereafter. If the tariff was designed to raise revenue rather than as an instrument of protection, Smith was fine with it, as were free-traders in the debates over free trade in the 19th century.

In 2018, Linda Yueh, writing for the Harvard Business Review, looked at Smith’s career as, well, a customs official:

As the commissioner of customs for Scotland, he advocated removing all trade barriers, which was qualified only by the need to raise revenue for what he considered to be the proper purposes of governing a country, such as providing roads. He supported levying duties on imports and exports at a moderate level, but not so high that smuggling would be profitable.

The federal government takes in about $3 trillion a year in income taxes, a number roughly equivalent to what the U.S. imports. So, assuming that all things remained equal (which they wouldn’t), that would imply import duties of 100 percent. Somehow, I have a feeling that’s a rate high enough to make smuggling profitable. And then there’s the small matter of what such a rate hike would mean internationally and then at home. Smoot, Hawley, and all that.