Donald Trump's commerce secretary Howard Lutnick has been all over television in recent weeks defending the president's trade wars, but a new fact check of his claims found that "much of what he says is economically incoherent and contradictory."
The billionaire former Wall Street executive claims that Trump's tariffs don't do much to "change virtually any price" on most goods and products, including iPhones, but Washington Post fact-checker Glenn Kessler examined the accuracy of those comments.
"This flies in the face of basic economics," Kessler wrote. "Economists agree that tariffs — essentially a tax on domestic consumption — are paid by importers, such as U.S. companies, which in turn pass on most or all of the costs to consumers or producers who may use imported materials in their products. As a matter of demand and supply elasticities, overseas producers will pay part of the tax if there are fewer goods sold to the United States. Moreover, because imported goods are more expensive, domestic producers will raise their prices to the level imposed on importers."
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Lutnick argues that companies can avoid tariffs by making their products in the U.S., and Kessler found that many of the high-value parts for an iPhone, which the commerce secretary regularly cites as an example, are already created domestically, but its low-value parts are primarily made overseas to prevent the cell phone from becoming prohibitively expensive.
"By one estimate, an iPhone 16 Pro — currently priced at $1,199 — would cost as much as $3,500 if made in the United States," Kessler wrote. "Other estimates are lower, but all say the price would increase substantially. Besides higher labor costs, the iPhone has many imported parts — from 43 countries — that would be subject to tariffs."
Some of Lutnick's figures are simply "nonsense math," Kessler wrote, such as his claims about a $1.2 trillion trade deficit and how that could be cut by 25 percent to boost GDP by 1 percent.
"The total trade deficit was $918 billion, though the goods deficit was $1.2 trillion," Kessler wrote. "A component of the GDP is net exports (exports minus imports, including services) so a decrease in net exports can lower GDP growth but — and this is complicated — more demand from overseas or even increased consumer spending can boost the GDP."
Trade deficits are shaped by a network of underlying factors, including economic growth – the more money people have, the more they can spend on imports – and a strong currency means foreign goods are comparatively cheaper.
"Lutnick ignores all that nuance with a simpleminded calculation, Kessler wrote. "Since the GDP is nearly $30 trillion, he says that a $300 billion decline in the trade deficit would add one percent to the GDP. But retaliatory tariffs on U.S. products can make it more difficult to export — and, given currency fluctuations and changes in consumer spending, there’s no guarantee that a $300 billion decline in the trade deficit would be in place forever."
