Tariffs Will Make Us So Rich! The Fool's Gold of Tariffs

There are assessments, reports, and studies about the effect of tariffs on America’s Economy. This is not really unusual or unexpected. Those involved in monitoring and measuring America’s economy do this as part of providing the data and analysis that are needed by our government, our businesses, and our citizens; not to mention economists and financial institutions.

What is surprising is that there is a debate about how tariffs operate at the most basic level. This is easily seen in the some media entities supporting the claim that US tariffs are paid by foreign nations. This was never true, it isn’t true now, and it will not be true tomorrow; no matter who says it. This doesn’t mean that people cannot choose to believe it. But a choice to believe something doesn’t add even the smallest weight of evidence to the scales that measure True vs False, Fact vs Lie, Intelligent vs Asinine, or Wisdom vs Gullibility.

This is relevant and important because when it comes to understanding and assessing the Economy a correct understanding of who “pays” for something is absolutely critical to being able to know anything about what is occurring in an economy, business, budget, or balance sheet. You can believe what you want; but your wallet, checking account, investments, and any form of financial transactions operate on a clear and singular understanding of who pays and who is paid. This applies to tariffs just as it does to any financial transaction.

Trump promises that his tariffs will make America rich again. It is an interesting promise for numerous reasons.

If a 25% tariff was placed on 100% of all imports into America, it would generate $1T in revenue for the federal government. This is based on a $4T annual value of US imported goods. So, this points out one problem, Trump’s tariffs won’t apply to all imported goods. At some point the estimated tariffs revenue was $130B per year. This is nothing compared to the $500B annual deficit that his tax cuts will produce. The most recent estimate on 2025 tariff revenues is approximate $287B, or roughly $200B more than in 2024. Last time I checked 500 is still bigger than 200. So, it’s a good thing I suppose that Trump’s tariffs are adding more revenue to the federal treasury. But who’s paying that revenue to the treasury?

This isn’t a hard question to answer. There are numerous ways to find out who pays for tariffs. Unfortunately, no one source is sufficient since there are different people making absolutely contradictory claims. If you choose to believe one source than you are flipping coin as one source is no guarantee that it is presenting the correct answer (the truth) or the incorrect answer (the lie). What is required here is converging answers from different sources. This is easier to do than one might think.

Presumably you have a source that you “trust” or believe in. For example, a portion of the public believe Trump is correct that the foreign nation pays. Adam Smith, the “Wealth of Nations” author, states that tariffs are a tax upon the nation imposing them. These are thus contradicting claims. If you gave each of these views equal weight, then you don’t have a clear basis for your choice / belief. But you do not have to stop here. You could ask economists. The vast majority of economists will unquestionably tell you US tariffs are paid by US citizens/businesses. The only economist that I know of that agrees with Trump is Peter Navarro and his statements do not actually say that the tariffs are paid by the foreign nation. So, it’s a weak kind of support. The weight would tend to shift toward the Adam Smith and most economists.

Where else would one check? There are economic textbooks whose publication dates predate 2016. Don’t be surprised what they will state. There are lots of other books on economics which will also state the same thing. In summary they will state that tariffs are taxes, that tariffs are paid by the company/person importing the goods in the nation receiving them, and that those costs are passed on to the economy of the receiving nation and impact its economy. More weight on the tariffs are taxes on the public side.

It is even easier to check the internet for information about tariffs. The internet will provide more evidence about tariffs taxing a nation’s public.

What about news entities? What do they say about tariffs? The only major news outlet that supports Trump’s position is the Fox network and they are as evasive Navarro when it comes to actual support of the position.

How about decisions to remove tariffs from items that aren’t or can’t be produced in America? Why would it matter to the American people if the foreign nation sell them were paying the tariffs? The logic and data just don’t add up. More weight for the tariffs are taxes on you side of the scale.

If by now you don’t have sufficient information to aid you in your choice of who is telling you the truth, there are hundreds of thousands of Americans who can confirm that tariffs are taxes paid by American companies and businesses. And of course, there are extensive amounts of information that the federal government has and provides which clearly define tariffs are taxes and paid by US businesses.

If tariffs are going to make America rich because those tax revenues are bringing more revenues in from other countries, that will only be richer in terms of “Fool’s Gold”.

It’s ok to believe what you want, but it doesn’t change the reality of the world nor does it exempt you from the consequences that are incurred by what is true independent of what you believe.