President Trump announced Friday another pause on some tariffs on products imported from Canada and Mexico after a rocky week for equities markets trying to price in their effects. At the same, he says that tariffs could go higher than 25% in the future.
Trump’s stated reason for imposing the tariffs on the two USMCA partners is their failure to control illegal immigration and drug trafficking across their borders into the United States. Apparently, the president believes tariffs are the cure for just about anything, including illegal immigration.
But in a Q&A aboard Air Force One, Trump returned to the more traditional mercantilist arguments in favor of tariffs that he campaigned on. Asked if he is worried about a recession, Trump replied no, adding,
“All I know is this. We’re going to take in hundreds of billions of dollars in tariffs and we’re going to become so rich, you’re not going to know where to spend all that money, I’m telling you, you just watch. We’re going to have jobs, we’re going to have open factories, and it’s going to be great, and the plane is landing, and thank you for a lot of good questions. Thank you very much.”
There is a lot to unpack in that relatively short answer.
First, the president seems to believe taxing and spending are the keys to a strong economy. He tells the reporter “you’re not going to know where to spend all that money.” But it won’t be the reporter or anyone else in the private sector spending the money. It will be the government.
He also says the tariffs will collect “hundreds of billions of dollars.” As the president has also suggested tariffs could replace the income tax, it is worth noting that would require thousands of billions of dollars, not hundreds. Three thousand billion, to be exact, when counting the $500 billion in corporate taxes collected last year in addition to $2.5 trillion in personal income taxes.
But the last part of his answer carries the main foundation of Trump’s economic vision.
Candidate Trump promised tariffs would protect domestic manufacturers and their employees from cheaper foreign competition. Indeed, imposing tariffs similar to those imposed upon U.S. imports to its trading partners would cause manufacturing productions and jobs lost to China and other, lower labor cost countries would return to the United States. All this begs the question: What is the goal of the tariffs? Are they meant to collect revenue, perhaps enough to replace the income tax, or to protect domestic production? “Both!” Trump and his supporters would probably answer. It’s win-win. Americans will be so tired of winning some might be hospitalized for exhaustion. But tariffs can’t do both. It’s physically impossible.
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Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?
