Tariffs Start Washing into the Government Checking Account

The cashflow of Customs and Excise Taxes has nearly doubled in two months.

By Wolf Richter for WOLF STREET.

Collections from customs and excise taxes spiked by 81% in April from March, to $17.4 billion, more than double the average monthly collections in 2023 and 2024, according to Treasury Department data today.

And in March, collections from customs and excise taxes ($9.6 billion) had already increased by $1 billion from February ($8.9 billion). Over those two months, collections nearly doubled (+95%).

This $17.4 billion is the amount in customs and excise taxes that the Department of Homeland Security – which includes the law enforcement agency Customs and Border Protection – transferred in April into Treasury’s checking account at the Fed, the Treasury General Account.

A chart like this is kind of funny. But it shows that something substantive is happening. Tariffs are taxes paid by businesses. How much? It’s adds up:

For example, GM just announced that the new tariffs would cost it $4 billion to $5 billion this year and lowered its earnings forecast with respect to that. It has also begun to shift production to the US to dodge some of those tariffs.

GM manufactures components in China, it manufactures its Buick Envision at its joint venture in China and imports it, it imports vehicles and components from Mexico and Canada, it imports components and materials from around the world. After its bailout out of bankruptcy by the US government in 2009, GM focused on China and Mexico and shed dozens of US production facilities for components and vehicles. So now there’s a price to pay.

GM cannot pass on the tariffs to consumers because automakers are having to discount their models and throw incentives at the market to sell their vehicles so that they can keep their production lines going. After the massive price hikes during the pandemic, there is no more room left to hike prices. Consumers have had it.

But profit margins in the auto industry have been huge following those massive price hikes, and the companies can eat those tariffs, show up with lower profits, and still be fine. See GM.

And not just in the auto industry. Nonfinancial companies in the US made out like bandits during the era of massive price increases — and they have plenty of room to eat the tariffs:

Some of the largest most profitable US companies pay little in corporate income taxes in the US because they manage to keep much of their profits outside the US, where they’re taxed in low-tax jurisdictions, such as Ireland. Apple is a great example of this – as we know from a 2013 US Senate investigation.

If Apple manufactured consumer electronics in the US, it could no longer shelter its income earned from those US sales, and would have to pay corporate income taxes on it in the US (or engineer another tax shelter). Tariffs level the playing field.

Trump specifically singled out Ireland on Liberation Day. The US had a larger trade deficit in goods with tiny Ireland ($87 billion in 2024) than with Germany ($85 billion).

This $17.4 billion in Customs and Excise Taxes was just the initial shot.

For mere mortals, it’s impossible to keep up with tariff chaos. Trump had imposed various tariffs before April 2, but on “Liberation Day,” he imposed additional tariffs, and later paused some of those additional tariffs for 90 days, while leaving the prior tariffs intact. Except with China, where he later raised the Liberation Day tariffs to 145%, after China counter-tariffed. But some China-made products have already been exempted from the additional 145% tariffs, such as smartphones. The governments of China and US are now sort of talking, or at least talking about talking. Numerous negotiations are apparently underway with corporate executives and with governments of other countries, each one trying to get their special deal. So whatever.

The “de minimis” exemption from all tariffs for shipments of $800 or less remained in effect throughout April and shippers didn’t pay any tariffs on them in April. But collections started in May.

That loophole accommodated an increasingly large flow of imports directly from China and other countries to US consumers and retailers. In the last fiscal year, 1.36 billion shipments came into the US tariff-free through that loophole, more than triple the number of shipments in 2018 (411 million shipments), according to Customs and Border Protection.

The stated dual purpose of tariffs is to first change the math for manufacturing in the US, and second, to increase tax revenues. Tariffs were the original tax revenues in the US, predating income taxes.

In terms of manufacturing in the US: There have already been numerous announcements of large investments in US manufacturing facilities by manufacturers across the board. These investments will take time to play out – years of big investments in the US before mass production can start. These investments alone are a big boost for the US economy. And companies such as GM that already have plants in the US have started to shift more production from their foreign plants to the US plants.

Other countries use far higher tariffs. India charges up to 110% on imported cars. China charges enough so that it’s not possible to sell mass-produced imported lower-priced cars in China. If you want to sell mass-produces cars in those countries, you have to make them there. And it worked for them, without a lot of moaning and groaning from GM, Tesla, Ford, etc.

Manufacturing in the US – and the investment, know-how, infrastructure, etc. that come with it – is immensely valuable to the US economy, including for its secondary and tertiary benefits, and also for the large amounts in federal, state, and local tax receipts these activities generate.

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  21 comments for “Tariffs Start Washing into the Government Checking Account

  1. Glen says:

    Do you expect some of the exemptions to be lifted over time? The iPhone makes a massive profit so to me that would have been a natural one to keep in place. Not clear of the rational on many of them while of course others made sense.

    I guess I am highly suspicious as well that the billionaire class doesn’t have ulterior motives like pushing through another corporate tax cut being paid for with tariffs and cuts in other places.

    • Zoroto says:

      Trump does whatever the last person he talked to told him.

      So he probably talked to Tim Apple last.

      • Old Beyond Caring says:

        Hi Zoroto,

        Your biases are showing. Investing based on emotions rather than reasoned logic is generally not conducive to -oh never mind, why should I care?

        Best wishes to all, especially Wolf who continues to demonstrate for me at least, the best things in life are free.

  2. ed says:

    If the tariffs work there will be silence from economists and the MSM.

    • Depth Charge says:

      Doubt that. Every headline from the MSM would make you think the entire US economy and stock market have melted down, we’re in another great depression, and WWIII is here. They are getting clowned so badly right now. They look like asswipes.

      • Cold in the Midwest says:

        Correct Depth Charge. Not only do they dramatize their (supposed) tariff effect predictions, the language they use to do so is actually humorous. It tends to the violent.

        Companies don’t reduce their payrolls, they “slash” them. Countries are not negotiating tariffs, they are engaging in a “trade war.” And companies are not carefully considering how to handle these tariffs, they are feeling the “trade turmoil.” And so on.

        Slash, war, turmoil, etc. The seas boiled and the skies fell. The potential bad is CONSTANTLY overemphasized, the potential good is consistently ignored. Such is the state of the agenda-driven US MSM.

    • Zoroto says:

      Nah, they will double down.

  3. Sns says:

    Cool story, but what kind of revenue would we get from appropriately taxing billionaires?

    • Wolf Richter says:

      It’s not either or. But ultimately, tariffs are a tax that comes out of importers’ profits. Billionaires are billionaires because they own big chunks of companies. And some of their companies are now getting taxed through tariffs. So this may be one way to tax some billionaires indirectly, a little bit.

    • Cory R says:

      Define appropriate? Nationalizing 5% of their equity every year and selling on the market?

    • Old Beyond Caring says:

      There is no such thing in the macro world as ‘taxing the (rich) billionaires, is there? There are only public sector taxes that one way or another fall on the private sector economy.

  4. Pcskier says:

    Sure GM and the big companies who have enjoyed bigger profits since COVID (that chart is shocking) can afford to absorb some tariff expense. The pain will be felt by small and medium sized companies that squeak by. In others words, the little guy is the one who will be crushed and many have to close up shop.

    • Blake says:

      Small and medium companies are nimble and should be able to source their products locally, which is the whole intent. It’s the big comapnies who’ve leached off globalization and will not be able to adapt very quickly, in my opinion. Poor GM, they will have to make more stuff in the USA and reward shareholders with 4B less buybacks…..brings a tear to my eye.

    • Wolf Richter says:

      Lots of small and medium size manufacturers in the US have been killed by imports over the past decades. Don’t you feel sorry for them? Manufacturing in the US was gutted by four decades of “globalization.” Whole towns were gutted. Don’t you feel sorry for them? Millions of people that had decent jobs in manufacturing lost them and could never find anything like it again and had to work in fast-food joints. Globalization has done huge damage in the US. Go to some of those towns to see!

      Now there are manufacturers in the US, big and small, that will thrive with these tariffs. “Call me pro tariff”: Whirlpool CEO Marc Bitzer. Whirlpool still manufactures its US products at numerous plants in the US, including in Tulsa which they started when I was still there. Whirlpool and manufacturers like it with lots of production in the US will benefit.

      • Geriatric says:

        Good on you Wolf, a rare sense of reality on the tariffs issue, America has been penalised by other countries for an excessively long time. In fact a lot more pain could still be required.

      • TrBond says:

        I recommend the book “Dignity”, written about the devastation to small towns and the people affected throughout America from the globalization wave that took away manufacturing to foreign shores.
        I myself grew up in a blue collar town that once teemed with small and medium sized manufacturing.
        Now? None, not one manufacturer is left.

        Bringing manufacturing back to America while improving our country’s finances would be a great result

      • Old Beyond Caring says:

        Thanks for mentioning Whirlpool.

        WHR was started in a small garage in Benton Harbor, Michigan in 1912 by the three Upton brothers, Lou, Fred and Uncle Emory. Until the early 1960s most of it assembly operations remained in the local area.

        Today, all the component manufacturing and assembly operations have moved elsewhere. Only the WHR corporate headquarters remain. The population of Benton Harbor and Berrien County have shrunk since 1960 as well, mirroring in no small degree the decline of Whirlpool’s local manufacturing base.

        As for Benton Harbor, like Whirlpool, I was born there and I’m gonna die there. Luck beats skill, every time. Thanks mom and dad.

  5. drifterprof says:

    Big question is: Will the drunken sailors become infuriated if their splurge buying behavior is tamped down?

    • graphic says:

      There are lots of big questions, hence the “uncertainty” in the business surveys and CEO reports. The test will be the festive season and we won’t know for sure how that has gone untl next year. it’s tough for retailers having to decide what to order now.

  6. Sergey says:

    Another example is pharma companies stockpiling that drove the recent import spike, according to Brad Setser
    Most of pharma companies also announced investment plans into domestic manufacturing.

  7. Kent says:

    “Collections from customs and excise taxes spiked by 81% in April from March, to $17.4 billion, more than double the average monthly collections in 2023 and 2024”

    $17.4 billion divided by two is $8.7 billion, roughly the increase for April. $8.7 billion times 12 months is $104.4 billion. I’m guessing the big numbers haven’t kicked in yet.

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