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Treasury Secretary Stephen Mnuchin told reporters Monday how China is paying for tariffs after being asked whether he'd explained to President Donald Trump that China is not paying for the tariffs imposed by the U.S. "Well, let me explain the math very simply.
If the renminbi depreciates 15 percent and you put on a 15 percent tariff, that means that U.S. companies can buy in dollars, items that are 15 percent cheaper.
So, the fact that they buy things 15 percent cheaper means China is paying for indeed the tariff because when you look at the net economics, it's not costing U.S. companies anything because of the depreciation.
It really is simple math with the depreciation of the renminbi." The 14-month U.S.-China trade war has escalated sharply since May, when talks broke down after Beijing backtracked on earlier commitments to make changes in law to improve intellectual property protections, curb the forced transfer of U.S. technology to Chinese firms and improve U.S. access to Chinese markets.
Since then, U.S. President Donald Trump has sharply increased existing tariffs on $200 billion worth of Chinese goods and imposed or scheduled new tariffs on virtually all remaining imports from China to increase his negotiating leverage.