Tariff Increase Tendencies

• Add to inflation
• Increase interest rates
• Strengthen the dollar
• Reduce real consumer spending
• Reduce employment
• Reduce real growth
• Spur retaliation

Reduce the Fiscal Deficit Tendencies

• Strengthen the dollar
• Reduce growth

Weak Dollar Tendencies

• Increase exports
• Reduce imports
• Increase inflation

Strong Dollar Tendencies

• Reduce inflation
• Increase imports
• Reduce exports

Amusing Misfit Agenda

Trump’s promises are an amusing collection of misfit conflicting ideas.

Trump promised no tax on tips, no tax on Social Security, and no tax on overtime. He wants more military spending and he does want not any reductions on Social Security.

He is now in favor of the State and Local Tax Deduction (SALT).

He never said how he would pay for any of that other than increase tariffs which is of course preposterous.

Yet, Trump promises to reduce the deficit.

Dynamic Duo

One thing Trump can do is peel back regulations. This would be an across the board win.

The idea that we can save enough money to pay for all Trump’s promises with the dynamic duo of Elon Musk and Vivek Ramaswamy is silly.

However, I wish them well and I suspect they can come up with some things. But it won’t balance the budget.

I am fine with getting rid of the Department of Education, but try getting that through Congress. Nonetheless, let’s assume success.

The 2023 Department of Education budget was $274 billion, which included funding for children with disabilities (IDEA), early childhood education, Pell Grants, Title I, work assistance, among other programs.

If you can get Congress to slash all of that, then hooray, you saved $274 billion. Over 10 years that would be $2.7 trillion.

Wharton estimates that SALT-Related Costs alone would cost billion $1.1 trillion over 10 years.

That’s just SALT. The combined impact of all of Trump’s proposals is $5.8 trillion over the next 10 years.

The 2024 Trump Campaign Policy Proposals

Please consider the Penn Wharton post The 2024 Trump Campaign Policy Proposals: Budgetary, Economic and Distributional Effects

Summary: We estimate that the Trump Campaign tax and spending proposals would increase primary deficits by $5.8 trillion over the next 10 years on a conventional basis and by $4.1 trillion on a dynamic basis that includes economic feedback effects. Households across all income groups benefit on a conventional basis.

Key Points

• We project that conventionally estimated tax revenue falls by $5.8 trillion over the next 10 years, producing an equivalent amount of primary deficits. Accounting for economic feedback effects, primary deficits increase by $4.1 trillion over the same period.
• While GDP increases during part of the first decade (2025 – 2034), GDP eventually falls relative to current law, falling by 0.4 percent in 2034 and by 2.1 percent in 30 years (year 2054). After initially increasing, capital investment and working hours eventually fall, leaving average wages unchanged in 2034 and lower by 1.7 percent in 2054.
• Low, middle, and high-income households in 2026 and 2034 all fare better under the campaign proposals on a conventional basis. These conventional gains and losses do not include the additional debt burden on future generations who must finance almost the entirety of the tax decreases.

Note that the estimate, counting positive factors is an increase in the deficit of about $410 billion per year, for 10 years, just to keep the status quo. The US fiscal deficit was $1.7 trillion in 2023.

And it does not include no tax on tips.

Import Analysis and Absurd Beliefs

In 2023, the total value of imports of goods and services to the United States was $3.8 trillion.

So, are we going to collect $3.8 trillion in tariffs on a total of $3.8 trillion in imports? $1.7 trillion? $0.7 trillion? $0.2 trillion? At what cost?

This is why it’s absurd to believe Trump can pay for his agenda with increasing tariffs.

Yet, Trump says he will simultaneously cut taxes, raise tariffs, increase jobs, and increase exports.

Impossible Conflicting Goals

Made-in-America in and of itself implies higher inflation. Trump threatened John Deere it it moved any operations to Mexico.

Lovely. This is telling farmers they have to pay more for tractors, combines, and other farm machinery.

Pro-union is pro-inflation. Building everything here to save US jobs means higher labor costs, higher prices, and reduces exports.

Related Posts

September 26: Trump Claims Tariffs Will Reduce the Trade Deficit. Let’s Fact Check.

Trump proposes 60 percent tariffs on China. Would that reduce the trade deficit? Where? How?

October 1: Trump vs Frederic Bastiat: Who Is Right About Tariffs?

Previously, I discussed tariffs and the trade deficit. This post is about Trump’s proposal to use tariffs to fund projects.

October 5: Buy American Provisions Cost $125,000 Per Job Created

“Buy America” sounds great. But it’s costly and about to rise steeply.

November 22, 2024: Trump’s Proposed Tariffs Are a Tax on Consumers, Primarily the Poor

Let’s discuss the impact of Trump’s tariffs on various income groups.

November 22, 2024: Should Anyone Care Whether Underwear Is Produced in the US or China?

This ridiculous-looking question gets to the heart of tariff discussions.

Weak Dollar or Strong Dollar?

Trump simultaneously needs a very weak dollar and a very strong one given his conflicting goals and promises.

He needs to explain to the US how this all works.

Since it doesn’t work, he won’t bother explaining.

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