Here’s another letter to a long-time hostile correspondent who continues to style himself “proud Trump man.”
Mr. McKinney:
Sharing with me this recent Truth Social post by Pres. Trump, you crow that I “can’t argue against the man’s success!!!!”
Perhaps not. But I can argue against fallacies that create the illusion of success. I have mainly in mind this whopper from Trump: “We are taking in TRILLIONS of Dollars in Tariffs and Investment Dollars from foreign lands because of Tariffs.”
Well.
Erica York, Huaqun Li, and Aleksei Shilov of the Tax Foundation estimate that Trump’s tariffs will this year raise an additional $158.4 billion in revenue. Let’s assume, contrary to fact, that all of this revenue is paid by foreigners. Let’s also be exceedingly generous and increase this figure by 50 percent, to $238 billion. So that’s $238 billion in customs revenue; alas, it’s only a fraction of “TRILLIONS.” Therefore, to get to “TRILLIONS” (meaning at least two trillion dollars), the amount of “Investment Dollars from foreign lands because of tariffs” (by which Trump means foreign direct investment) must therefore be at least $1.76 trillion. Is it?
In the first half of 2025, inward foreign direct investment (FDI) was $145 billion. Let’s again be exceedingly generous and assume that FDI in the second half of 2025 will be triple this figure, coming in at $435. That would mean that FDI for all of 2025 would be $580 billion. $580 billion in FDI added to $238 billion in customs revenue gives us a sum for 2025 of $818 billion. This sum isn’t even half of what it would have to be if Trump’s boast of “TRILLIONS of Dollars in Tariffs and Investment Dollars from foreign lands” were accurate.
You’ll protest, insisting that Trump is taking into account projected future customs revenue. Fine. Let’s look at some credible projections.
The Yale Budget Lab projects that customs revenues will sum, over the eleven years 2025-2035, at most to $2.6 trillion. Benn Steil estimates that Americans – both as importers and, mainly, as consumers – will pay 75 percent of these revenues, or $1.95 trillion of them. That leaves only $650 billion in customs revenues over eleven years coming in “from foreign lands.” That’s far from “TRILLIONS.”
The bad news for Trump’s boast doesn’t end there because the tariffs will reduce U.S. economic growth, thus causing Americans’ real incomes to be lower than otherwise – and, not incidentally, also nullifying any gains that Americans might reap from whatever increased FDI Trump’s tariffs manage to attract. The Yale Budget Lab predicts that, as a result of the tariffs, “in the long run, the US economy is persistently -0.4% smaller, the equivalent of $125 billion annually in 2024$.” Over a decade, that’s lost income of $1.25 trillion, a figure that swamps the $650 billion that these tariffs are projected to raise from foreigners in that same time.
Trump’s tariffs will inevitably make us Americans poorer than we’d be without the tariffs. A great pity is that Trump, like you and all other sincere protectionists, is so benighted and bedazzled by his fundamentalist protectionist faith that he cannot see that a people do not gain greater access to goods and services when their government obstructs their access to goods and services. He’s blind to the fact that his act of obstructing our access to goods and services makes us, not richer, but poorer. His blindness, alas, is our heavy economic burden.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
