- Yuri Gripas/Reuters
- US tariff revenue in the third quarter increased by nearly 40% from the same quarter last year.
- President Donald Trump on Wednesday again claimed US tariffs were a cost to other countries, but economists say the tariff revenue is coming mostly from the pocketbooks of American businesses and consumers.
President Donald Trump likes to talk about the money Washington is making from the spate of tariffs his administration has imposed on global trading partners. The catch? Most of it is probably coming from American pocketbooks.
At a postelection news conference on Wednesday, Trump misleadingly claimed that billions of dollars would “soon be pouring into our Treasury from taxes that China is paying for us.”
He got the first part right. Federal revenue from tariffs in the third quarter increased by more than 33% from the same quarter last year, Treasury Department data shows. And in October – the first full month in which all tariffs announced to date were in effect – the monthly collection appears to have doubled from the 2017 level to about $6 billion, according to estimates from daily receipts.
But in theory, those tariffs were probably more often paid by Americans than by foreign businesses. Tariffs operate just like any other tax, meaning the associated costs can pass through supply chains and fall onto those not directly involved. When the Treasury Department charges a country 25% to ship a product into the US, importers or their customers often have to absorb those costs.
“The president looks at this and says it’s coming from foreigners,” said Mary Lovely, a professor at Syracuse University who is a fellow at the Peterson Institute for International Economics. “That’s not technically correct. I mean, I go to Macy’s and pay a sales tax. Macy’s is the one that sends the check to the government, but that doesn’t mean they’re the ones that pay the tax. I am.”
When asked about tariff revenue during an interview with CNBC that aired in August, Treasury Secretary Steven Mnuchin suggested the long-term objective was not to raise money for the US. The White House, which did not respond to an email requesting comment, has instead said its policies are meant to pressure other countries to change trade practices seen as unfair. For example, China has been accused of intellectual-property theft.
The president has nevertheless sought to highlight the money rolling in from duties. Back in August, he said it could start paying down “large amounts” of the national debt, which is more than 3,500 times what the Treasury Department is bringing in from tariff revenue each month.
The Trump administration has placed tariffs on roughly $300 billion worth of imports to date, threatening its policies could further escalate on multiple fronts. US trading partners have retaliated by imposing taxes on American shipments, causing some businesses to worry they could be shut out of foreign markets.
“Tariffs are worse than taxes because they create uncertainty,” said Adam Ozimek, an economist at Moody’s Analytics. “We have the tariffs that are in effect and that is costly, but there is also the threat of future tariffs and reprisals from other countries hanging over businesses and consumers.”