Commerce Secretary, Howard Lutnick, recently discussed how foreign governments are shouldering the majority of U.S. tariffs, particularly China which is paying an average tariff of 52 percent. Lutnick explained that while China is facing high tariffs, the Chinese government is mostly covering the costs.
According to Lutnick, most countries are not dealing with tariffs above 15 percent. When tariffs do exceed this threshold, foreign governments step in to support their businesses during negotiations for better terms.
Lutnick emphasized that tariffs of 10% or less are typically absorbed by manufacturers, distributors, and businesses, rather than passed on to consumers. However, when tariffs range between 10 and 15%, the costs are shared between distributors and manufacturers, resulting in a slight price increase.
For tariffs exceeding 15%, Lutnick stated that it becomes challenging for businesses to manage the costs without government intervention. He highlighted examples where governments such as South Korea, Japan, and Europe covered the tariffs to protect employment and avoid price hikes.
Lutnick praised President Trump’s tariff strategy for prompting other countries to engage in negotiations, citing successful deals with Japan and the EU. These agreements have led to benefits such as reduced tariffs on U.S. car imports and significant investments in American projects by Japan.
Overall, Lutnick believes that tariffs have contributed to reducing the U.S. deficit and fostering economic growth. He predicted a construction boom in the coming year, with substantial investment in new factories and a significant increase in GDP.
In conclusion, Lutnick foresees a surge in factory construction and economic growth, driven by the impact of tariffs and trade negotiations.