To be sure, if the IEEPA tariffs are struck down, they will have a negative fiscal impact. We estimate the IEEPA tariffs will raise about $2.0 trillion on a conventional basis if they remain in effect over 2025-2035. However, that revenue must be put in the context of the broader US fiscal situation and incorporate the negative economic impacts of the tariffs on federal revenue.
We estimate the IEEPA tariffs will reduce the long-run size of the US economy by about 0.7 percent, reducing income and payroll tax collection. Incorporating this effect, the IEEPA tariffs would only raise $1.2 trillion from 2025-2035. These estimates do not include the revenue impact of tariffs levied as part of Section 232 investigations.
As of January 2025, the Congressional Budget Office (CBO) projected the US would raise about $73.5 trillion in revenue over 2025-2035, which Tax Foundation’s estimates to about $70.2 trillion after the passage of the One Big Beautiful Bill Act (OBBBA) in July. If the IEEPA tariff revenue is collected, this amount rises to $71.4 trillion over 2025-2035, or about a 1.7 percent increase in federal revenue over that period.
…..
The US fiscal trajectory is on an unsustainable path over the next 35 years, regardless of whether the IEEPA tariffs are struck down or maintained. The possible “financial ruin” and entitlement insolvency that the administration references is driven by the large and growing structural gap between projected entitlement spending and federal revenue overall, which dwarfs the revenue lost by striking the IEEPA tariffs down.
Exports of American soybeans to China have collapsed this year, with no new orders logged in recent months ahead of the prime autumn export season. Before Mr. Trump’s first round of tariffs on China in 2018, China was the largest export market for American soy. It typically bought about 30% of total U.S. soybean production and some 60% of American soybean exports. Those exports were worth $12.8 billion annually, the soybean farmers’ trade association reports.
…..
At least American soy farmers are in good company as China targets a range of American agricultural products for retaliation. Cattle ranchers are seeing Chinese demand for American beef dwindle as China shifts its consumption to imports from Australia.
The protectionists’ solution is to throw more subsidies at American farmers. Agriculture Secretary Brooke Rollins and Mr. Trump this month floated plans to use a portion of tariff revenue to write checks to farmers.
Mr. Trump said the handouts to farmers might continue “until the tariffs kick in to their benefit,” in which case Treasury will be making payouts for a long time. And talk about blowing a hole in protectionists’ argument that tariffs are free money for the government that can be used for other purposes.
…..
But the plight of America’s farmers is a reminder that the destruction of a trade war is mutually assured, and not inflicted solely by one side on the other as Mr. Trump’s trade warriors so often claim. Treasury Secretary Scott Bessent has said America holds all the cards in Mr. Trump’s tariff game because the rest of the world needs to sell us stuff. Tell that to America’s farmers.
Kevin Williamson decries Democrats’ inability to talk correctly about international trade. (HT Scott Lincicome) Three slices:
Case in point: Rebecca Cooke, the Democrat challenging Republican incumbent Derrick Van Orden in Wisconsin’s 3rd Congressional District, wants to pick a fight with the Trump administration over trade policy. Good idea: The Trump administration’s trade policy is a gigantic slop bucket of amateurish buffoonery into which congressional Republicans have dived headlong, and the district Cooke would like to represent includes a bunch of soybean farmers who are getting absolutely hosed—for the second time—by Donald Trump’s incompetence. Most informed observers would likely agree that a team of monkeys who graduated at the very bottom of their monkey community college class would probably produce a more intelligent and coherent policy.
Small problem: Cooke doesn’t know a damned thing about trade. Or at least that is the impression her campaign literature gives.
…..
Un-dumbing the U.S.-China trade relationship so that soybean farmers can go back to serving their biggest export market may not be possible. But if it is possible, it is not a matter of the Trump administration ending tariffs on Chinese soybeans or somehow convincing the Chinese to end tariffs on U.S. soybeans while the U.S. government continues to conduct a broader trade war. The Chinese didn’t choose soybeans at random—they know how to make a trade war hurt. If you want U.S. exporters to have access to the Chinese market, you cannot get there by mucking around with soybean policy in isolation—you have to clarify and stabilize the overall trade relationship, which will necessarily include reducing U.S. barriers (tariffs, etc.) to Chinese exports. If you want something from Beijing, you have to give Beijing something Beijing wants, too: That’s how negotiation works. Our president, however much he likes to pretend to be a world-class negotiator, is utterly incompetent when it comes to that sort of thing.
…..
When I talk to Democrats, they try to convince me that they are where I am on trade. But Democrats are not running on a free-trade platform. They are running on a platform of pretending that economic tradeoffs aren’t real or that they can be magicked away with sufficient cleverness in policymaking and rhetoric.
Republicans often justify state capitalism in the name of “America First” nationalism and national security. Democrats advance it under the banner of climate policy, industrial renewal, or social equity. Both parties are moving to a model where the government picks winners and losers, where free enterprise is at the whim of leaders, and where individual economic freedom is subordinate to political objectives.
But whether Republican or Democrat, what’s happening should alarm anyone who believes in limits on government power. When presidents of either party can restructure private companies through executive “deals,” we cross a dangerous line. When the government can take equity stakes in businesses and demand revenue shares, we’re abandoning the principle that private property exists without the approval of the state.
Matt Mitchell and Pete Boettke plead “Make America capitalist again.” A slice:
With the federal government now the largest shareholder of Intel, an ostensibly private company, Commerce Secretary Howard Lutnick wants you to know that “This is not socialism.” But if public ownership of the means of production isn’t socialism, what is?
With feverish speed and characteristic blunderbuss, President Donald Trump has given the federal government – and himself – unprecedented control over private economic decisions. Call it socialism, economic nationalism or any “-ism” you want. It is a threat to the profit-and-loss system at the heart of American prosperity.
“What separates FreeCons from NatCons?”
Every previous group of communists has been equally convinced that this time, everything will turn out differently, concentrating massive amounts of power in the state won’t lead to the corruption of those running it, the stifling of dissent will be for the greater good, the state punishment of those who disagree will be fair and not abusive, and a worker’s paradise is just a five-year plan away. It would be funny if it didn’t represent such willful blindness, and if people like this weren’t gaining more strength in the modern Democratic Party.
Paul Moreno isn’t impressed with Jill Lepore’s new book, We the People.
Chris Brunet ponders today’s bear market for economists. (HT Dan Klein).
