More on Tariffs (1)

Dean Baker has an interesting comment about the Trump Tarriffs.

Foreign countries are not eating the taxes that Trump is imposing on our imports from them. In May, the first month where many Trump tariffs were in effect, the US collected over $22 billion in tariff revenues. That would come to almost $250 billion on an annual basis, or an average of roughly $2,000 per household.

If foreign countries were eating these taxes, we would see a decline in import prices, which are measured without including the tariff. In fact, non-oil import prices rose by 0.3 percent in May and are up 1.7 percent over the last year.

With Trump preparing for another massive round of tariffs he is promising to hit American households with the largest tax increase in history. Here is another.

In June the government collected $26.6 billion in tariff revenue. That is up from around $6 billion a month in 2024 before Trump’s tax hikes. The difference of $20 billion comes to $240 billion on an annual basis. Summed over a decade, as we do with other measures, this comes to $2.4 trillion.

This would be a substantial tax hike in itself, roughly $1,900 per household, but we know that the figure is almost certain to go much higher. Trump is threatening taxes of an additional 10 to 30 percent on imports from our major trading partners, such as Mexico, Canada, the European Union, and Japan. These comments confirm to me something about the Trump Tarriffs that is often missed. They are not just about trade. Trump looks back to the 19th century when citizens of the US paid no income taxes. At that time the federal government collected its revenue using duties on imports.

Dean Baker suggests that the Trump Tarriffs will collect $250 billion in a full year. As this will be mostly be paid by American consumers, it represents a significant tax increase. Trump hopes that it will make a significant affect on the trillion dollar budget deficit.