Proponents of tax increases on others seldom like to pay them personally. Tariffs are no different. The White House claims its tariff revenue is coming from foreign countries, but Americans will soon pay new levies on small packages from abroad because of an executive order President Trump signed last week.
On Aug. 29, the U.S. will end its de minimis exemption, which grants Americans a tax break for small mail-order purchases from abroad. For the first time since 1938, international packages will arrive with a tariff bill to be paid by the recipient. That means your next eBay purchase from Europe will incur a 15% tax. Your online coffee order from Brazil will face a 50% markup. And everyday purchases from Amazon Haul, or its Chinese competitor Temu, will come with a surcharge matching the tariff on its origin country. If a postal carrier isn’t equipped to calculate the fee according to Mr. Trump’s ever-changing tariff schedule, the new tax is a minimum $80 flat rate per package. In total, Mr. Trump’s order will put tariffs on the estimated 1.36 billion packages that Americans receive every year from online purchases that were previously tax-exempt.
Tax hikes are seldom rewarded at the ballot box. That’s why the White House is trying to justify its order by saying the de minimis exemption is abused to send fentanyl and other synthetic opioids undetected. The vast majority of fentanyl smuggled into the U.S. comes from one country: Mexico. But Mr. Trump is ending the de minimis exemption for packages from all countries. Although fentanyl is a deadly drug, there’s no evidence that taxing worldwide e-commerce will stop drugs from entering the U.S.
Trump may be playing with fewer cards than he realizes when he attempts to negotiate tariff deals. The EU and other governments know that time is on their side with both the tariff lawsuits and the US political climate. And that recognition changes the dynamics of their strategies by shifting them away from retaliation. Consider the possible scenarios.
The biggest risk to Trump right now is that the appellate and Supreme Courts both strike down his IEEPA tariff orders, and with them every “deal” he has secured to date. Courtroom outcomes are never guaranteed, and they tend to operate on the judges’ own schedules, but this outcome could conceivably occur in a matter of months. If that’s the case, then the EU has every incentive to take the 15 percent tariff “deal” and just wait it out until the courts make their determination.
Suppose that the Supreme Court punts on the case for procedural reasons, or finds a rationale for upholding the tariff policies. Even in this scenario, waiting may still be the more prudent strategy for the EU and other trading partners abroad. They may be banking on Trump losing one or both houses of Congress in the 2026 midterms, as often happens to the incumbent president’s party. If the Democrats regain the majority, they will almost certainly remove a procedural rule that Republican Speaker Mike Johnson imposed back in April to prevent floor challenges to Trump’s IEEPA tariffs (Johnson adopted this rule because he currently lacks the votes to defeat a direct challenge if a handful of free-trade Republicans break ranks and vote with the Democrats). An opposition Congress would make it more difficult for Trump to enact tariffs by executive decree, thereby limiting his ability to use them as leverage for his “deals.”
David Hebert explains that “tariffs tanked GDP, not imports.” A slice:
GDP is meant to measure the amount of production that happens in a country. Since “production” is difficult to measure in and of itself, the Bureau of Economic Analysis instead measures “expenditures.” This makes sense because, if we think about it, any time we spend money on a good, someone else must have produced that good that we bought.
But what about people who buy American-made products who do not actually live in America? Clearly, we should count that spending, too. Lo and behold, we do, which is why we add exports to American spending totals, reflecting the production that happened here despite the spending happening elsewhere.
Because the BEA, however, tallies all the spending that Americans do in a given period, and Americans also spend money on imported goods, that spending on imports would also be included in this expenditure method. To fix this, the BEA simply subtracts the value of all the goods that we import from other countries.
Caleb Petitt reviews the legal briefs against Trump’s “Liberation Day” tariffs.
My Mercatus Center colleague Jack Salmon makes clear that Trump’s trade ‘deal’ hurt Americans. Two slices:
Behind the fanfare lies a stunning truth: these so-called “trade deals” are actually a massive tax hike on American consumers and businesses. The White House may call it market access, but what we’re really getting is market restriction.
Rather than negotiating mutually beneficial tariff reductions, these agreements have instead carved out politically targeted protections for select sectors while hiking duties on a wide array of imports.
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The administration’s messaging is clear: these agreements will “open” foreign markets to U.S. businesses. But let’s be honest, Japan, the U.K., and Vietnam have long been major trading partners with relatively open markets. The true effect of these deals is to make imports more expensive for Americans by replacing lower tariffs with much higher ones.
This is not trade liberalization. Its protectionism rebranded. And it contradicts decades of economic understanding about the benefits of free trade. If anything, these moves are more about serving narrow political interests than promoting prosperity.
Former Speaker of the U.S. House Paul Ryan (R-WI) is correct about Trump’s tariffs:
They justified tariffs based on trade deficit… But then they threw a tariff on Brazil at 50%, and we have a trade surplus with Brazil. There’s no rationale for this other than the president wanting to raise tariffs based upon his whims, his opinions.
GMU Econ alum Dominic Pino reviews Ezra Klein’s and Derek Thompson’s Abundance. Three slices:
In Abundance, authors Ezra Klein and Derek Thompson clearly state their thesis in the introduction: “To have the future we want, we need to build and invent more of what we need. That’s it.” And that’s the problem. Their thesis doesn’t make sense because they fail to consistently define the word that appears three times in that statement: “we.”
Klein and Thompson see their book as a missive to the American left and an antidote to the “degrowth” ideology that has taken hold in parts of it. Their vision for “abundance liberalism” is more about a shift in focus and emphasis than an entire ideological overhaul for the left. It has spurred debate within the left about whether it presents an opportunity to correct some of the mistakes that cost Kamala Harris the 2024 election or is merely a “neoliberal” wolf in sheep’s clothing.
It is neither. People who are more favorable to free markets may be tempted to applaud left-wing authors, conceding that government isn’t always the answer, but Klein and Thompson still don’t understand the role of individualism and markets in creating the abundance they desire.
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They are clear about what they want. Their vision of the future involves a lot of green energy, mass transit, housing construction, and research and development investment. They want vertical farming, lab-grown meat, automated technology, and supersonic airplanes.
Some of this vision sounds attractive to me. Some of it does not. That’s fine, and it’s true of all visions of the future. But they assert that this vision is the future that “we” want. I should be included in “we,” but I am not.
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Individuals are the ultimate decision-makers in a society. They are naturally part of groups (families) and often choose to organize themselves into other groups (corporations, governments, religious institutions, etc.) in ways that are healthy and beneficial. But individuals in the end have to choose to show up to work, use their brains to come up with new ideas, and persuade others that those ideas are worth developing.
One reliable way to get other people to do things for you is to allow them to make money from doing it. And there is already a mechanism by which that happens: markets. People get paid for coming up with good ideas and providing goods and services that make other people’s lives better. The development and expansion of markets around the world have delivered more abundance than thousands of years’ worth of human thought possible.
One reason markets work is that they do not need there to be “a single set of answers.” They work with decentralized information spread throughout society that is possessed and used by different individuals. That information condenses into a price, which is a signal to others that informs their decisions. They allow for the appearance of top-down coordination where none exists, and they perform better than attempts at top-down coordination because they incorporate information that top-down planners cannot access.
The answer Klein and Thompson are yearning for is markets. But they are respected American liberals, and respected American liberals can’t run around referencing Adam Smith or F. A. Hayek or Milton Friedman. So they’re just lost, aimlessly writing about stuff they want other people to do for them.
George Will wonders how much longer humanity’s luck will continue to protect us from the devastation of nuclear war. Here’s his conclusion:
Thucydides said three things cause wars: honor, fear and interest. Come Wednesday, 29,220 days will have passed since the first use of a nuclear weapon, and 29,217 since the second. What in humanity’s carnage-strewn history of honor-driven angers, rational and irrational fears, and ideologically defined interests suggests there will not be a third, and then others?
