On Wednesday’s broadcast of the Fox Business Network’s “Kudlow,” White House Council of Economic Advisers Chair Stephen Miran said that he believes exporters will end up eating far more than half the cost of tariffs “because they’re inflexible and we’re flexible. Because we can substitute to home production, we can substitute to different countries to import from.”
Host Larry Kudlow said, [relevant exchange begins around 8:00] “Kevin Hassett and I have talked about this for years. I think the — I like to use China as the exporting nation, but the exporters who are hit by this, they’re going to have to eat half of it. they’re going to eat half of it.”
Miran responded, “They’ll eat much more than half, because they’re inflexible and we’re flexible. Because we can substitute to home production, we can substitute to different countries to import from. The countries that have built their entire economies around exporting to the American consumer have no substitute. They’re inflexible. They will eat the burden of the tax in the long run. And what that means is that they ultimately pay for the burden of the tariff. Now, there [are] a couple ways that can happen. It can happen through the exchange rate, and part of that played out in 2018, 2019, or they can just lower their selling prices. But one way or another, they’ll pay.”
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