Tariffs: A Painful Bessent Moment on “Buyer Pays”

We include links to an especially embarrassing but telling exchange in Congress on the topic of “Who pays” the tariff. 2+2 still equals 4.

• We link to a very telling exchange between Sec of UST Bessent and a Congressman on the simple questions of who “factually” pays the tariff at the border. It was painful to watch.

• We have been watching and reading the various tariff sales pitches across time, and they get fairly repetitive whether simply false (from the White House) or effectively mired in evasive doubletalk and repositioning a simple, factual question as advanced economic theory.

• In some cases, it gets embarrassing. This was one of those times. In other cases, it is disheartening since so many gullible people buy the misinformation.

Congressional hearings are often like watching paint dry, but a congressman tried to get Bessent to confirm 2+2=4.

On CNN : Who Pays the tariff?

YouTube longer version: Who pays tariffs?

As a brilliant finance guy, Bessent has the ability to talk his way around anything, but a 2+2=5 statement is a tough one for him. He knows 2+2=4. That cannot be said about the Senate or House GOP. They are happy to say 2+2=5. Bessent struggled.

The congressmen could have done better in locking him down with a 100% factual question, “Who pays the tariff at the border to US Customs? Does the seller pay the tariff at the border or the importer?” This question is second only to, “Who won the 2020 election?” in the Trump gospel.

Either way, it is a sign of the times on the “second biggest lie” that the US is collecting billions and billions from selling country trade partners. We are collecting from the importer, which means the US based buyer.

After that, the analysis of the economic sharing of pain begins (seller may have cut its price, the importer eats the cost, the end market players (homebuilders, packaged goods companies, auto OEMs, equipment, OEMs, etc.) find ways to allocate costs to others such as the supplier chain. The portion that gets passed on in higher prices to the consumer is complex, but the factual chain begins at the border, where the buyer pays. The fact is the “buyer/importer” write the check. Bessent could not bring himself to say it.

This game will continue for a while until all the tariffs are flowing into transactions. Denial will continue as attention spans are held in low regard, and contempt for supporters rules the day.

The topic will matter more in the very near future as inventories run down, restocking ceases, and the supply-demand imbalances set in as we saw during COVID. The weaker dollar will also have the opposite effect of what the GOP border tax bill of 2017 promised in the House by Ryan and Brady. They also wheeled out their hired gun professor to support the party line. The promise there was that the dollar would get so strong that the tariff would be price-neutral in dollar terms. That was dumb then and looks even dumber now. That was one of several reasons why the GOP Senate threw the House bill in the trash back then (turf was the main reason).

The economic fallout is knocking on the door for summer and fall impact…

We updated the trade numbers for the US with the world and with Canada in a commentary posted yesterday, and the tariff targets and countries in the crosshairs are daunting. The clock is ticking to the point where tariff costs and supply-demand relationships will take control (see Trade: Uphill Battle for Facts and Concepts 5-6-25).

The reality is that once you give a domestic constituency a big trade edge, it is hard to take it away. We saw that with Biden’s hesitation to change much other than to rebadge some Section 232 tariffs with friendlier deal labels other than “national security.” The idea of Trump backpedaling on his core gameplan is hard to see as realistic.