President Trump tweeted in May 2019, “I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers … great for U.S., not good for China!” As indicated by the chart below, which is based on the latest Federal Reserve data, Trump’s 2019 estimate was off by about $29 billion. Customs revenues in the second quarter of 2019 rose to about $71 billion. Indeed, we have still not seen $100 billion in tariff revenues. Even if we had, we might wish to subtract the amount in government payments being made to farmers as a result of tariff-induced lost markets.
….Guess what, that’s not going to happen! China has just informed us that they (Vice-Premier) are now coming to the U.S. to make a deal. We’ll see, but I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers…great for U.S., not good for China!
— Donald J. Trump (@realDonaldTrump) May 8, 2019
But even if we got the number right, we would still be left with a huge tariff revenue appreciation puzzle: How can it be great for the United States when consumers and business firms shell out an extra $85.5 billion to obtain foreign-produced goods that previously arrived almost tariff-free?
And if paying more for what we consume really makes us great, why doesn’t the Trump administration double down on tariffs and raise them even higher? The fact that the administration is currently working to reduce tariffs on Chinese goods, celebrating when they are successful in doing so, seems to acknowledge that we consumers should actually feel great when tariffs go down.
So get this: We win when tariffs go up and win again when they go down. What a marvelous on-again, off-again tariff-inspired roller-coaster ride we are getting!
That’s not all. Earlier in February, the U.S. announced an increase in tariffs to be imposed on Airbus planes sold to our domestic airlines. The increase, from the current level of 10% up to 15%, was approved by the World Trade Organization after a lengthy dispute related to the foreign subsidy toward Airbus production. Though too small to easily notice, we can expect to pay a bit more when buying airline tickets.
And there may be even more. In late January, at the World Economic Forum in Davos, Switzerland, Trump threatened to impose tariffs on $60 billion of European automobiles and parts, unless Europeans behave differently when regulating American firms. As expected, they promised to respond with $100 billion in tariffs on American products.
Unfortunately, our European cousins seem interested in building their own Great American Tariff Scream Roller-Coaster Machine.
If all this comes to pass, we can look forward to receiving another presidential tweet telling us how fortunate we are to be paying more for airplane tickets in higher priced planes, for automobiles with European pedigrees, for most of the ordinary and not-so-ordinary Chinese goods we love to buy, and for Canadian timber, butter, and cheese. Indeed, we may eventually learn that even more than $100 billion in customs has been collected from us and feel even greater.
It is a wonderful world, isn’t it? I am beginning to wonder.
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
