Claims of Raking in $6 Billion Per Year Are Inflated and Overlook Consumer Impact
Only 50 percent of U.S. adults possess a basic level of numeracy skills. Based on its tariff math, the White House skill level appears to be below average.
Senior Trade Counselor Peter Navarro predicts the tariffs imposed by President Trump will rake in $600 billion per year and $6 trillion over a decade. He argues that would cover the $4.5 trillion cost of extending the 2017 Trump tax cuts over 10 years. Economists dismissed Navarro’s estimated tax collection total as vastly overstated.
Missing from his calculation is who winds up paying tariffs. Trump insists foreign nations do. Economists say importers pay the tariff, then pass along the cost to consumers. In other words, tariffs are just like a sales tax.
Using revenue from a regressive sales tax to replace revenue from a progressive income tax doesn’t add up as good public policy. That’s especially true when combined with anticipated spending cuts to Medicaid and other programs that would have the greatest negative impact on Americans at the bottom of the economic totem pole.
Erratic Decision-Making
Another flaw in Navarro’s math is Trump’s erratic on-and-off tariff decision-making. He says tariffs are here to stay, then pauses them, except for China. Meanwhile, the stock market took a three-day hit when the tariffs were a go. Tariff revenue didn’t pour in, but people’s investment accounts sucked air.
The latest round of tariffing by Trump involved calculating how individual countries are allegedly taking advantage of American consumers and punishing American workers. Economic experts poked large holes in the numbers and ridiculed the math. The United Kingdom and Singapore, which both run trade deficits with the United States, still were targeted with tariffs. War-torn Ukraine exports were subject to a tariff. Russia wasn’t on the tariff chart.
“The Trump administration’s calculations are a fundamentally nonsensical way to calculate ‘reciprocal’ tariffs,” says Erica York, vice president of federal tax policy at the Tax Foundation. “Absolutely none of the factors the White House purports to be looking at, like tariffs, non-tariff barriers or other unfair practices, factor in to the tariff rate they calculate in any way. They are invented numbers that have zero relationship to real policies.”
Targeted nations are predictably imposing retaliatory tariffs. Canadians and Europeans are boycotting many U.S. products and canceling trips to America. Trump insists tariffs are the yellow brick road to prosperity with manufacturing returning to the homeland so men can return to assembly lines, work with their hands and feel pride again.
The rationale for tariffs is so silly that SNL’s cold opening on last week’s show made fun of Trump and his chart, showing it originally in the form of a Cheesecake Factory menu. The script used by James Austin Johnson, the cast member who does a dead-on Trump impersonation, was ripped from actual comments made by Trump in defense of his tariffs.
The skit ended with comedian Mike Myers portraying Elon Musk and repeating his quote that tariffs and Navarro are both stupid.
Looking at Actual Numbers
Which brings the conversation back to Navarro, the lead cheerleader for tariffs. The Washington Post fact-checker explained Navarro grabbed the $3.3 trillion in U.S. imports in 2024, rounded it down to $3 trillion and applied an average 20 percent tariff to get his $6 billion annual revenue number.
That assumes the tariffs are imposed and left in place, which already isn’t true. York says Navarro’s math is bogus because it ignores how tariffs affect buying habits. Retaliatory tariffs, she adds, make U.S. exports less competitive in foreign markets, resulting in domestic job losses, a shrinking economy and lower tax collections.
The Tax Foundation and Budget Lab use sophisticated economic models to calculate trade elasticity – what happens when trade barriers or tariffs are introduced. The models indicate an average 20 percent tariff will reduce imports and tariff collections by 20 percent.
Apart from the math, human nature plays a role in coping with tariffs. Not only do consumers buy less, exporters figure out ways to evade tariffs, which further reduces Navarro’s magic revenue number.
Perhaps the biggest math miscalculation is how tariffs, which are a tax, reduce income, profits and tax revenue. The Congressional Budget Office estimates the indirect negative impact on tax revenue could be as high as 25 percent.
All these factors chip away at the revenue tariffs might generate. Instead of the Navarro goal of $6 billion per year, a more realistic estimate is $295 million in net revenue per year, equating to less than $3 trillion over 10 years, which is substantially less than the $4.5 trillion Trump tax cut price tag.
The Human Factor
The human dimension of tariffs gets lost in the discussion of tariff math. Fox News & Friends host Steve Doocy described the plight of New York toy importer facing the wrath of Chine’s reciprocal tariffs in response to Trump’s 104 percent tariffs.
“When the tariffs went into effect at midnight, his tariff on stuff he gets from China went from $26,000 a year to $346,000,” Doocy said. “And that’s money that will have to come out of his pocket. It sounds like he’s going to go ahead and close down part of his business.”
“He said people don’t understand tariffs. They think just foreign countries are paying for the tariffs. That’s not true,” Doocy explained. Instead, the toy importer said they are paid by small businesses and American consumers.
