Investigating Trump's Claim of Using Tariffs to Pay Down $21 Trillion in Debt

Trump said that trade wars are good and easy to win. He also proposed using tariffs to pay down debt. Let's investigate.

Let's compare that Fantasyland projecting with some hard data.

“Billions of Dollars are pouring into the coffers of the U.S.A.,” tweeted President Trump last month, “because of the Tariffs being charged to China.”

It would be nice if it were true. But it is, in fact, doubly false.

First, tariffs are not “being charged to China.” They are being charged to American firms importing Chinese goods. As the left-hand bar in the graphic above shows, such firms will pay about $8.4 billion in tariffs on China imports by the end of 2018.

Second, this tariff revenue does not remain in U.S. government “coffers.” As shown in the right-hand bar above, all of it and more is being paid out to American farmers as partial compensation for their losses from Chinese tariff retaliation. The U.S. government has already committed to paying out $1.2 billion more to angry American farmers than it will take in this year from angry American firms.

By launching a trade war with China, therefore, the president has simultaneously raised taxes on U.S. companies and lost the government money. And with the farm constituency critical to his 2020 re-election hopes, the losses are only set to mount going forward.

Tariff Man

Things We Know

  1. Trump is "Tariff Man".
  2. President Trump and Treasury Secretary Mnuchin are Totally Clueless About How Markets Function
  3. Trump does not understand basic math nor concepts like "large amounts". Paying down $21 trillion of debt via tariffs collected at $8 billion per year would take 2,625 years.

Point three presumes that the Treasury actually collected $8 billion in tariffs. The article shows that tariffs on Chinese goods cost $1.2 billion due to farm subsidies.

The administration's plan to a Convene Plunge Protection Team (PPT) is icing on the clueless cake.

Mike "Mish" Shedlock

Comments
No. 1-9
Escierto
Escierto

The Great Leader, Kim Il Trump, is the expert on everything. Under his guidance, we keep winning and winning. So much winning!

Sechel
Sechel

oil is at $50 a barrel. Ford & GM have hit some speed bumps. World economy has definitely slowed down. Trade wars, tariffs and quotas have never been a recipe for growth.

Realist
Realist

If Trump somehow manages to be president for 8 years, he will add more to the debt than any president in US history. His inability to understand simple math concepts and his history of treating debt as something to renege on, will not end well for America.

bayleaf
bayleaf

The jury is still out on the tariff debate. By some accounts, the world should have ended already yet here we are.

thimk
thimk

so net,net,net - this was a exercise in futility.