CEO: 'I'm the One Who Paid the Tariffs. China Did Not.'
When then-President Donald Trump imposed huge new tariffs on a wide range of imports from China in 2018, it was entrepreneurs like Deena Ghazarian who paid the price.
"To be clear, I'm the one who paid the tariffs. China did not," Ghazarian, the founder and CEO of Austere, a consumer tech accessories company, told the House Energy and Commerce Committee during a hearing on Wednesday. "I had to absorb these costs of the tariffs to avoid pricing my products out of the competitive accessories landscape."
Ghazarian had launched Austere just months before the tariffs hit. Her company specializes in selling high-end HDMI and audio cables, along with other components for home theaters and surround-sound audio systems. It is an American-owned and operated company, but one that relies on equipment and parts shipped from China. That meant she was collateral damage in the Trump administration's trade war, which included tariffs of up to 25 percent on consumer goods and electronic components imported from China.
At the time the tariffs were imposed, Trump and his top trade advisers argued that Chinese firms would bear the brunt of the costs. "China producers pay for these tariffs in the language of economics, they bear the burden of the tariffs through lower prices, lower exports, lower profits," Peter Navarro, then the head of the White House's Office of Trade and Manufacturing Policy, told Fox Business in 2019.
That's not what actually happened. As Ghazarian said on Wednesday, it was (and still is) American companies that have paid for the tariffs, a fact that even the federal government now acknowledges. In a study published in March, the U.S. International Trade Commission concluded that American companies and consumers "bore nearly the full cost of these tariffs because import prices increased at the same rate as the tariffs."
The accumulation of academic and anecdotal evidence hasn't done much to change policy in Washington, however. Neither has the outcome of the 2020 presidential election. President Joe Biden was correct in 2019 when he said "Trump doesn't get the basics. He thinks his tariffs are paid for by China. Any beginning econ student at Iowa or Iowa State could tell you the American people are paying his tariffs."
Alas, the Biden administration has kept those tariffs in place.
For entrepreneurs like Ghazarian, that has meant a scramble to find alternative sources for some products—a process, she added, that is neither inexpensive nor easy. In other cases, she's had no choice but to absorb the added cost of those import taxes.
An attempt to navigate what she called the "arcane, nontransparent, and highly uncertain" tariff exclusion process run by the Office of the U.S. Trade Representative (USTR) ended in frustration. Her appeals to be exempted from the tariffs were denied, and the USTR never responded to her follow-up requests asking why the denial was issued.
That's a fairly typical experience. As Reason has reported, the tariff exclusion process is effectively a bureaucratic black box with no due process for those whose claims are denied.
The experience, Ghazarian said, left her feeling like she was the government's adversary, "rather than a United States–headquartered company employing Americans."
For years, CEOs and entrepreneurs from a wide range of industries have been sitting in front of Congress to deliver this same message: Trump's tariffs hit Americans square in the face (and the wallet). The Biden administration has acknowledged that tariffs are adding to inflation too. So far, none of that has made much of a difference.
When the COVID-19 pandemic hit, Austere was one of hundreds of American companies that took advantage of the federal government's Paycheck Protection Program to stay afloat. Looking back on that ordeal now, Ghazarian told the committee that her loans through that program effectively served to offset the tariff payments that she was still obligated to make throughout the pandemic.
"It would have been more efficient to repeal the tariffs entirely," she said, stifling an ironic laugh, "which would have lessened the need for companies to seek government resources…to stay alive."