Trump's tariffs will not bring in the revenue he expects

In addition to punishing successful foreign countries and supposedly encouraging the USA to produce more of its own goods instead of importing them, the Trump administration maintains that the ever-changing tariffs will bring in a huge bonanza of cash to America's coffers. That seems less likely than the administration would like to admit.

Peter Navarro, Trump's trade guru claims that the tariffs will bring in $6 trillion over the next ten years, or about $600 billion a year. This is based on a back-of-an-envelope calculation - actually, it doesn't even require an envelope - of last year's annual imports of $3.3 trillion multiplied by 20%, which is his guess of where the effective rate of tariffs might eventually settle down.

Such a calculation, however, ignores a whole bunch of economic dynamics and known unknowns, including the fact that tariffs reduce demand for foreign goods, shrink the tax base, depress income and payroll taxes, foment retaliation and levy-dodging by exporters, etc, etc.

Others have tried to come up with a figure for increased tariff revenues, and they are much more modest. The Penn Wharton Budget Model estimates revenues of about $290 billion a year. The Budget Lab at Yale forecasts $180 billion a year. The Tax Foundation estimates a paltry $140 billion a year.

Well, I say "paltry". These are huge figures, but much less than Trump is counting on, and much much less than the massive income tax cuts he is thinking of offering to his voting base. And in the meantime, he has pissed off the rest of the world and squandered any goodwill they may have harboured towards America, and most countries are looking for any possible avenues to avoid dealing with the US at all.