Yves here. This is a useful overview of the Trump tariffs and tax scheme. Note that this post forecasts, as just about any economically literate look does, that new tariffs will lower growth in comparison to current conditions.
This article does not address the likely increase in inflation. A reason for the lack of much in the way of estimates is the impact is hard to work out. For instance, from CNBC:
Exactly how much higher prices would go is hard to say. The relationship certainly isn’t as simple and direct as some Democrats have suggested by contending that tariffs would function as a “20% sales tax,” says Clark Bellin, chief investment officer at Bellwether Wealth.
“Especially when you throw the inflation we’ve been having into the mix, it’s hard to come up with a line item like, ‘This is how much things have gone up because of tariffs,’” he says.
Vox raises the question of whether Republicans on Supreme Court would block these measures. I assume that the Democrats are not expected to joing per the summary of Napoleon’s advice: “Don’t get in your enemy’s way when he is making a mistake.”
Note that Vox also found experts that are not deterred from estimating the impact of Trump tariffs but their figure vary widely. From Vox:
Though Trump inherits a strong economy and low inflation, he’s proposed a 10 to 20 percent tariff on all imports, and a 60 percent tariff on all imports from China. The Budget Lab at Yale estimates that this policy alone could raise consumer prices by as much as 5.1 percent and could diminish US economic growth by up to 1.4 percent. An analysis by the think tank Peterson Institute for International Economics, finds that Trump’s tariffs, when combined with some of his other proposals such as mass deportation, would lead to inflation rising between 6 and 9.3 percent…..
If Trump pushes through his proposed tariffs, they will undoubtedly be challenged in court — and, most likely, in the Supreme Court…
Will this Supreme Court permit Trump to enact policies that could sabotage his presidency, and with it, the Republican Party’s hopes of a political realignment that could doom Democrats to the wilderness?
The legal arguments in favor of allowing Trump to unilaterally impose high tariffs are surprisingly strong. Several federal laws give the president exceedingly broad power to impose tariffs, and the limits imposed by these statutes are quite vague.A presidential proclamation imposing such tariffs wouldn’t be unprecedented. In 1971, President Richard Nixon imposed a 10 percent tariff on nearly all foreign goods, which a federal appeals court upheld. Congress has since amended some of the laws Nixon relied on, but a key provision allowing the president to regulate importation of “any property in which any foreign country or any national thereof has or has had any interest” remains on the books.
The judiciary does have one way it might constrain Trump’s tariffs: The Supreme Court’s Republican majority has given itself an unchecked veto power over any policy decision by the executive branch that those justices deem to be too ambitious. In Biden v. Nebraska (2023), for example, the Republican justices struck down the Biden administration’s primary student loans forgiveness program, despite the fact that the program is unambiguously authorized by a federal statute.
Nebraska suggests a Nixon-style tariff should be struck down — at least if the Republican justices want to use their self-given power to veto executive branch actions consistently. Nebraska claimed that the Court’s veto power is at an apex when the executive enacts a policy of “vast ‘economic and political significance.” A presidential proclamation that could bring back 2022 inflation levels certainly seem to fit within this framework.
The Vox piece has additional detail on potential legal jousting.
By Bill Haskell. Originally published at Angry Bear
Since we have a new president who favors Tariffs, we should start talking about how those Tariffs will impact the US Economy and Citizens. The Tax Foundation offers up a brief explanation which should be readily understandable for Angry Bear readers. If Trump is able to pull this off and get it out of Congress, I do not see much favoring it in terms of economic growth. Then there is also covering the costs of the 2017 Tax Cuts and Jobs Act (TCJA) which has yet to pay for itself in economic growth.
The TCJA was supposed to die under a Biden Admin. Biden removed himself as a candidate and Democrats lost an election by not turning out. Which is very similar to what happened in 2016 with Clinton v Trump. Must be that Dems do not favor women as the Presidents? More of that later when I can examine the numbers.
There are multiple sources to this commentary on Trumps Tariffs and Tariffs in gemeral. I have linked to each if you wish additional information or check my comments further.
Introduction
President-elect Donald Trump has proposed to implement a universal baseline tariff on imports when he takes office. We estimate a 10 percent universal tariff would raise $2 trillion and a 20 percent universal tariff would raise $3.3 trillion from 2025 through 2034, before factoring in how the taxes would shrink the US economy.
In 2025, a 10 percent universal tariff would increase taxes on US households by $1,253 on average and a 20 percent universal tariff would increase taxes on US households by $2,045 on average.
Revenue raised by tariffs would fall short of what is needed to fully offset the revenue losses of making the expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA) permanent.
Revenue Estimates of Trump’s Universal Baseline Tariffs (Billions)
Process to Estimate the Revenue Impact of a Tariff
To estimate how much revenue a universal tariff raises? We start with a baseline projection of goods imports over the next decade. Imposing a tax on imports would reduce purchases of foreign-produced goods, resulting in fewer imports. We apply an import elasticity of -1 to project how imports would fall in response to a 10 percent tariff and a 20 percent tariff. How much imports shrink thus varies with the applied tariff rate, implying that doubling the rate does not double the revenue.
From there, we multiply the import tax base by the inclusive tariff rate (the rate divided by one plus the rate) to estimate initial customs duty revenue raised under perfect compliance before making an adjustment to reflect an 85 percent compliance rate, which represents the average tax gap.
After the compliance adjustments and before accounting for income and payroll tax offsets; we estimate a 10 percent universal tariff would generate $2.7 trillion of customs duty revenues and a 20 percent universal tariff would generate $4.5 trillion of customs duty revenues.
The Total Revenue Raised
The total revenue raised will be less than the customs duty revenue generated by the tariff because tariffs reduce incomes (taxes paid as mentioned above), reducing income and payroll tax collections. Accounting for income and payroll tax offsets, our conventional revenue estimate finds that the 10 percent tariff would generate $2 trillion of increased revenue, while the 20 percent tariff would generate $3.3 trillion over a decade.
And The Economy?
Both taxes (Tariffs) would shrink the size of the US economy. The dynamic scores are smaller: $1.7 trillion for the 10 percent tariff and $2.8 trillion for the 20 percent tariff. If foreign countries retaliate, even partially, to the US-imposed tariffs, revenue will fall further as the economy shrinks even more. For example, we estimate a 10 percent tariff on all US exports would shrink tax revenues on a dynamic basis by more than $190 billion over 10 years.
Tariffs Tried?
Second Term President Trump once said during his first term. One of his primary foreign policy goals was to rein in global adversaries like China and take U.S. trade partners to task for growing trade deficits (defined as U.S. imports exceeding exports). Trump’s approach to achieving this goal was enacting tariffs, especially focusing on China. These tariffs have negatively impacted trade between the U.S. and China, leading importers to shift toward Mexico’s west coast instead of shipping directly to the United States. As a result, trade between Mexico and China has grown by 60% in one year. And . . . product was being trucked north to the U.S. The tariffs have been circumvented with an additional step. Mexico gained and the US? Nothing . . .
The tariffs were supposed to benefit the average American citizen, who would then buy cheaper products made at home. Another example and this time with Steel. The US attempted to stop the sale ofa steel company. In one politically charged example, U.S. Steel made the first moves to sell the company to the Japan-based Nippon Steel Corporation despite decades of government subsidies. Strategically, this would have been a good idea if the plant was modern. It wasn’t. Chance are, China will lose on this sale.
That did not become the reality. The policy goal of creating and safeguarding American jobs failed. A 2021 study by the U.S.-China Business Council found the Trump tariffs resulted in an estimated 245,000 American jobs lost.
