How Trump tariffs could affect budget

The U.S. largely has been an advocate of free trade since World War II, generally seeking to knock down trade barriers over the past 75 years.

Recently, President Donald Trump’s calls for increased tariffs on China, Canada, Mexico, the European Union and other trading partners have raised concerns about a reversal of course on that long-held policy, escalating conflict that could lead to a trade war.

The administration has suggested imposing levies of $50 billion to $100 billion on China, and tariffs on a smaller amount of goods with friendlier trade nations have drawn retaliatory measures from some of the USA’s staunchest allies.

With those big eight- and nine-figure numbers getting tossed around, you might think that tariffs have played a major role in the federal government’s budget. Yet most of the reports on tariffs center on the amount of goods affected, not the actual revenue that comes in from the tariffs themselves. As the U.S. economy has grown over the decades, tariff revenue has risen at a slower pace. How big an impact the new tariff proposals could have on these figures isn’t entirely clear.

For tariffs, actual government revenue isn’t important. What matters is how they affect the decision-making process of importers and exporters. Regardless of whether actual collections of tariffs increase, the impact on those who specialize in imports and exports both to and from the U.S. market will be far greater than what shows up in future tariff revenue figures.