Tariffs Will Pay for Tax Cuts? The White House can’t be Serious.
Trump officials say trillions of dollars in tariff revenue will pay for their tax cuts. Don’t hold your breath.
(Originally published in The Washington Post)
After passing tax cuts that will likely cost $5.5 trillion over the coming decade, the Trump administration is under increasing pressure to rein in soaring budget deficits. So what’s the plan? Tariffs, tariffs and more tariffs.
Commerce Secretary Howard Lutnick recently claimed on CBS’s “Face the Nation” that tariff revenue “is going to pay off our deficit.” Administration estimates of 10-year tariff revenue have ranged from “substantial” (Treasury Secretary Scott Bessent) to $6 trillion (presidential adviser Peter Navarro) and now $7 trillion (Lutnick). Just last week, President Donald Trump asserted that these exorbitant projected gains even had him considering issuing tariff rebates to taxpayers.
As both a critic of Trump’s tariffs and a longtime deficit hawk, I would certainly find it to be nice if the silver lining of our misguided trade policies is that they helped scale back Washington’s nearly $30 trillion in projected 10-year budget deficits.
Unfortunately, no such silver lining exists. Not only is the reduction in deficits not worth the harsh economic damage from the tariffs, but it’s also likely to be modest at best.
Thus far, Trump has pushed up typical monthly tariff revenue from nearly $8 billion to over $27 billion. That additional $20 billion extrapolates to $240 billion annually and $2.4 trillion over the next decade — estimates that generally align with the consensus of static tariff revenue forecasts.
Except the economy is not static. Rather, it dynamically responds to trade wars in ways that will pare back that revenue.