It’s not nothing: At this pace, tariffs would raise receipts from corporate taxes by 39%, but would make only a dent into the huge US deficit.
By Wolf Richter for WOLF STREET.
Collections from customs and certain excise taxes spiked by $6.5 billion, or by 37.5%, in May from April, to $24.0 billion, nearly triple the average monthly collections in 2024 ($8.2 billion), according to the Treasury Department’s daily data today.
Over the past three months, they spiked by $15 billion, or by 168%.
This $24.0 billion is the amount in customs and excise taxes that the Department of Homeland Security – which includes Customs and Border Protection – transferred in May into Treasury Department’s checking account at the Fed, the Treasury General Account. This total of $24 billion includes a small amount in “certain excise taxes” (in April, $1.1 billion). The rest is from tariffs – so, roughly $23 billion in receipts from tariffs.
It’s not nothing: At May’s pace, these customs and excise taxes would amount to $288 billion per year, up by $190 billion from 2024.
Tariffs are taxes paid by businesses – some of the biggest of which pay little nor no income taxes in the US. Total corporate income tax receipts amounted to only $507 billion in 2024, or about 12.5% of the $4.1 trillion in pre-tax corporate profits, according to data from the Bureau of Economic Analysis.
And an additional $190 billion in tariffs per year would be an increase of 37% of the taxes paid by corporations.
Obviously, it’s not going to solve the $2-plus trillion US deficit, but it will make a little dent into it.
Profits at “nonfinancial” corporations alone – the companies more likely engaged in imports – reached $2.8 trillion in 2024, up by 120% from 2019.
This is where part of the inflation spike in 2021-2024 went, as companies took advantage of the consumers’ free-money-from-heaven benighted pay-whatever mentality at the time, and now there is plenty of room, huge amounts of room, to pay a measly $190 billion in additional tariffs without breaking a sweat.
But passing them on to consumers will be tougher because consumers have woken up, and they hate, hate, hate higher prices, and they have had it, and companies have had to cut many goods prices in 2023 and 2024 to prevent losing sales.
So this is not 2022 anymore. The free-money-from-heaven is gone, and price increases piss consumers off, and enough consumers said forget it when they encountered price increases, and shopped around for alternatives.
Consumers paid for this historic spike in corporate profits:
To dodge those tariffs, countless big companies have announced plans to shift production to the US, from GM on down – which is the primary purpose of tariffs.
Some plans involve simply shifting production to existing US factories. Others involve investing in the expansion of existing factories. And other plans involve building entirely new factories. The first can be done relatively quickly; the latter takes years to accomplish.
All three of them are immensely valuable to the US economy through the investment, know-how, infrastructure, employment of factory workers and tech people, secondary and tertiary employment, tax receipts, etc. that manufacturing in the US generates.
And there is a very long way to go:
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Would be nice to see Goods and Services Deficit. Also a breakdown of Good and Services deficits, country by countries we are raising tariffs on, though I bet that would be more than a little bit of work. As always, thanks for the insight.
All you have to do is read it:
https://wolfstreet.com/2025/02/05/trade-deficit-in-goods-worsens-to-all-time-worst-in-2024-small-surplus-in-services-improves-overall-trade-deficit-worsens-by-17/
The article shows you that the surplus in services is small compared to the deficit in goods, which is why the overall trade deficit is so huge. See chart below.
Also make sure you understand what services exports are: A big part is spending by foreign tourists in the US, a low-level economic activity, unlike manufacturing. Other services exports are US movies shown overseas, music sold overseas, etc., and those foreign revenues add ZERO economic activity in the US since the movies/songs were made for US consumption, and therefore already existed, and playing them overseas adds nothing to US economic activity (except for additional revenues and profits for the maker/rights-holder). Software is similar. People when they talk about services exports are clueless what they are and how little they actually do in the US.
Thanks again. Listened to a podcast last week where the presenter harped on the services surplus and I recalled it not being near crossing out the goods deficit, and you even addressed that in the previous post. I remember the post now because of the other post about tariffs normally not being sticky or “persistent”, as Jerome likes to use currently. Cheers mate.
Companies like Meta and Google have tax residency in Ireland, so they book profits there and pay taxes there. That revenue boosts Ireland’s GDP, not the U.S.. Not good for the U.S. trade deficit, however it’s income from an American company. Right ? Or I´m getting it wrong?
Yes, sacrificing the US economy and fiscal health at the altar of higher stock prices. you got that right.
I’m trying to understand the following statement:
“But passing them on to consumers will be tougher because consumers have woken up, and they hate, hate, hate higher prices, and they have had it, and companies have had to cut many goods prices in 2023 and 2024 to prevent losing sales.”
How do we know this is the case this time? Specifically, how do we know that they are going to act with the prudent response of protesting high prices? Your drunker sailor reports seem to indicate that they keep going on with their spending spree regardless of the insanity of the situation.
Isn’t it insane that people happily pay $16 for a basic sandwich that you can make at home under 5 minutes? $40000 for a huge car when most people keep driving solo? $1.6m for a house that a few years ago went for $800k and people thought it was already overpriced?
1. Nothing to do with “prudent response.” If you hike your price too much, and stay there too long, you go out of business because it kills sales (demand).
Companies ALWAYS raise prices to the highest possible level that the market will bear = that still allows them to achieve their sales goals. ALWAYS. Since Adam and Eve. The price you see today is already the HIGHEST PRICE that the market will bear.
The costs of making the product are irrelevant to the price that the market will bear. You cannot charge more just because your costs go up. If your costs go up and you cannot sell the product profitably, eventually you just go out of business. HAPPENS ALL THE TIME.
When sales fall off, companies cut prices. When sales are strong, they might raise prices. Car dealers and automakers are a prime example, as is Walmart. They all rolled back some of the price increases in 2023 and 2024, NOT because they love you and want to be nice to you, but because sales were falling off, and then these price cuts boosted sales. And we saw that and discussed that here in real time.
Ford had strong sales growth in May (+16% yoy announced today) because it had a huge campaign of “employee pricing,” which translates into massive price cuts across its lineup. PRICE CUTS WORK in stimulating sales, while price hikes lower or kill sales. Companies cannot afford to reduce their sales. That’s just how it is. Very basic economics. Every company knows this. 2021 and 2022 were very unusual years, fueled by free money, and they’re not coming back because the free money is gone.
2. Your $16 sandwich bought at a deli is a bad example because that’s a service (food services), where you pay for the service of not having to buy your own ingredients, and not having to plan and think about what kind of sandwich you want to create, and not having to spend your manual labor in creating the sandwich. You’re paying someone to do all the work.
But the same principle applies here too: The price is always at the maximum possible level while still maintaining sales and sales growth. If sales drop, prices are too high for the product. Lots of delis (and restaurants) go out of business all the time because they cannot get it right. It’s a very complex business to maximize your price AND your sales. And this happens every day, all day long, since Adam and Eve. That’s how a market works.
3. I’m not really sure why I have to keep facing those kinds of questions on a finance and econ site. Do people really not know the economic basics? Do people really not know how a market works?
If I was a business owner and my profit margin for example was 10% and a 40% tariff is added on to my cost, I have to raise my prices 40% to maintain my 10% profit. Also the exporting countries are not charged the tariffs, Americans are paying the tariffs.
Clueless BS.
The tariff is added only to the cost of the product at the port. It’s not applied to your costs of doing business.
Tariffs are NOT applied to your transportation costs, to your rent, your payroll, your payroll taxes, your banking fees, your internet fees, your computer and software costs, your advertising and promotion expenses, your healthcare expenses, pension plan contributions, etc. None of these costs of doing business are tariffed.
So for example, the Wolf Street Mugs I send out. They’re not for sale, they’re gifts for donations over $100, if the donor wants a mug. So there is no retail price. But these were the costs:
My total cost of getting the mug to you is about $22. Well over half of that are the shipping costs that I pay directly, from the distributor to the mug printer, and from the mug printer to me (on a pallet), and from me to you in a OneRate FedEx Pak (and Wolf Street Corp gets a discount from FedEx). Then there is the amount I pay the mug printer for three-color precision printing of the art work. Regular logo printers won’t touch that job. Then there are the packaging materials (wrapping paper and box) that I buy for the mug. And finally there is the blank glass mug itself. I cannot determine where the mug was made – I know the company that makes them, but they have factories in the USA, in Mexico, in China, and in Europe. So assume it’s made overseas and tariffed at your 40%. The cost of the blank imported glass mug for the mug printer from the distributor was under $4 at the time. The cost for the distributor/importer at the port would be lower, so that may have been $3.00 (for $1 gross profit for the distributor). That $3 would be tariffed at 40%, or about $1.20. If the tariff gets passed on to me, it would raise my cost from $22 to $23.20 or by about 5.4%, not by 40%. And I would just eat that tariff instead of passing it on. Duh.
Note that my costs had risen by about 25% in three years, from the first generation mug (2019) to the second generation mug (2022). And that wasn’t due to tariffs, but due to Bidens disastrous free-money economic policies that jacked up prices of everything.
Well, Wolf, price setting is basically something of an occult art, even in practice.
You are exactly right that companies will set their prices to the *maximum they can get away with* (costs irrelevant except as floor)…*but* the exact *setting* of those revenue maximizing prices is tricky (because it is the *combination* of price and volume sold that maximizes revenue).
And it doesn’t seem like the civilian outsiders actually *see* all that much price exploration “bouncing around” – companies at least appear to *mostly* stick to set prices with only occasional variations up and down (which kinda implies a mysterious skill in guessing revenue maximizing prices *in the first place*).
(I look at extended-stay lodging prices a lot – an industry where you would think that revenue/yield optimization would require a *lot* of price volatility – but I simply don’t see it in the customer-facing sites at least).
The fairly common experience of fairly consistent prices (especially ratcheted upward…) does make it harder to believe in the “price exploration/revenue maximization” practices of companies.
I’m not saying it isn’t going on (I’m pretty sure it is), but the seemingly infrequent nature of price-resetting (except for titanic macro moves like post-pandemic) makes it harder to intuitively believe in it.
Lodging, airline, and rental car pricing bounce around all over the place, from day to day. They change constantly.
BUT THESE ARE PRICE OF SERVICES, NOT GOODS, AND WILL NEVER BE TARIFFED, AND IT IS BS TO KEEP TALKING HERE ABOUT SERVICES JUST TO CREATE A BS ARGUMENT.
Bullshit Richter. For example, if the 50% steel and aluminum tariffs stick, both the airlines and rental car companies will eventually pay more for airplanes and cars, and that cost increase will be reflected in the pricing of their services. That’s just how it works. You’re the only one who can’t figure that out, which is why you have to resort to all-caps bold red text.
Bullshit Whatever,
The US is the 4th largest producer of crude steel in the world, and a large producer of aluminum, and companies can avoid the tariffs by buying USA-made products. You didn’t know that, did you???? You thought the USA wasn’t producing anything anymore???
The reason the USA isn’t #2 or #3 in the world is because Corporate America shifted production to other countries, including for tax benefits and other incentives, such as Alcoa which shifted much of its aluminum production to Canada. So Alcoa can just go ahead and charge more for Canadian-made aluminum and go out of business, adios, because USA producers can beat the tariffed price without breaking a sweat.
Or Alcoa can shift production back to the USA and be competitive with local production. It’s not rocket science. That’s what tariffs are all about.
The USA is the second-largest manufacturer by value added in the world, larger than the next three combined. You didn’t know that, did you??? You can produce anything in the USA with lots of automation and tech, if there is a will.
Wolf:
The answers to your questions above are that very clearly most people do NOT know econ/finance basics nor market basics.
Have known many folks who had businesses making tons of money and could not understand the basic difference between gross income and net income, and then were amazed when they went BK.
Still happening with a young friend working very hard and making tons of money and does not have a clue what his net is.
Just another example of the lack of fundamental financial education in the vast majority of secondary schools, which I also saw first hand while teaching construction technology in the CA Regional Occupation Program.
You can see a great example of this down here in South Florida. Joe’s Stone Crab, a fixture of Miami Beach for over a century, announced recently that it’s dropping its prices. Clearly, they raised their prices too rapidly during the boom free money years and bit off more than they could chew, pun intended.
You’re also seeing that with Starbucks adding in free refills and restaurants expanding their happy hours and other specials. It’s a way of reducing prices without actually admitting you’re doing it.
Even Disney, who looked unstoppable in 2021 and 2022, have brought back deals for Florida residents and even some deals for out-of-state people.
There is still a segment of people who will pay whatever you ask for anything they want to buy, and can afford to do so, but most people in America don’t fit in the middle of the Venn diagram of both having the money and not caring about how they spend it and whether they’re getting ripped off.
I have long hated the American consumer for being so spineless in fighting back, and perhaps gullible in accepting underhanded fees, shifts to subscription-everything, etc.
The wealth gap increasing isn’t helping. So many drunken sailors can and do buy whatever. Costs me a fortune every time I want something.
On a related note, I finally made it out to SF, Wolf. Super-interesting city, and amazing surrounds. But, JFC, it’s expensive (and with even more underhanded fees that should* face customer fury), much more than my own HCOL area. Makes me feel poor. I guess that’s why I normally vacation overseas.
Big business will continue to merge and consolidate power and control maximum pricing while tariffs take out the smaller competitors, both practices encouraged and rewarded by this administration.
Agreed. They’ll continue to F$&@ us from the top and the bottom. Abuse us as workers, abuse us as consumers with less quality and more fees, hikes, and traps. Continue to increase the trickery that keeps most consumers from fighting back. Take any and all wages paid back and keep all of us from getting ahead. It’s a disgusting model that is, as you said, actually encouraged by the Government, which should be (if that is not too naive to say) helping us.
Take some night classes and study Econ 101. This is basic stuff. Market will bare whatever price the customer is willing to pay. If you can’t find a way to be profitable and that price, you go out of business. This has been happening for eons.
Keep the tarrifs relatively low for our allies (Canada, UK, EU, Japan, Australia, etc), and I will admit that Trump was directionally and strategically right on this issue for the USA (although I really really don’t like Trump for many reasons; he shouldn’t be our president)
“… for our allies (Canada, UK, EU, Japan, Australia, etc),”
You’re wrong. On trade, there are NO ALLIES. There are only competitors trying to grab money. People have to understand that.
The EU was designed to compete with the US on trade and defeat it on trade, not to be allied with the US. The EU started out as a trade organization. And it has done so successfully by protecting its own market and by taking advantage of the globalist corporate agenda in the US. So the US now has a gigantic trade deficit with the EU.
The EU is ruthless on trade, and nearly as bad as China for the US. Mexico and Canada are not far behind. All this is fueled by corporate America and US policies that encouraged it to happen, sacrificing US production and the US economy and fiscal strength at the altar of high stock prices:
Hey Wolf (or anyone else) – any recommendations of some reading material that would help me better understand this? Anything from the history of such trade policies to the basic economics understanding of trade deficits. Thanks!
This is the key point that I never hear spoken about. When you manufacture something overseas and import it, it’s a direct cost to the US economy (and more importantly its people) since it offsets US production with all of the multiplier effects of taxes, spending and knowledge. all of this nonsense about comparative advantage etc, is just propaganda from corporate interests who are arbitraging labor and regulatory costs. Any economist who doesn’t understand the potential beneficial tradeoffs of tariffs is either dumb or completely compromised.
Why should we keep them low for our “allies”?
We pay for every single one of those countries defense and then they tariff our goods.
We also pay for much of their drug development, as the monopsony buyers can demand a much lower price.
There is the gvt revenue generating aspect of tariffs which is covered here.
But there is also the trade deficit reduction aspect (because foreign sourced goods prices’ increase) aspect – which arguably is more beneficial for certain things.
Perpetual and enormous trade deficits mean 1) Americans have been eating into their savings/seed corn to directly/indirectly fund those trade deficits and 2) Gvt appears to roughly parallel trade deficits with *fiscal* deficits in order to offset/obscure the effects of #1 (although ultimately doomed).
So tariffs, by raising “foreign sourced” prices, 1) reduces/eliminates the “bleed out” of US savings and 2) reduces the ostensible justification for perpetual *fiscal* deficits.
Tariffs are not perfect/costless – but America has grown so accustomed/addicted to other sorts of unilateral economic pathologies (perpetual trade/fiscal deficits) that tariffs may actually help by offsetting them.
(A *ton* of this disaster could have been avoided had China allowed/been forced to increase the value of the Yuan – that would have naturally lowered US trade deficits over time. But the WTO seems to act as a sort of lobotomized giant – once goods’ trade is “free” the WTO seems to let its brains turn to mush and wholly ignores Chinese domestic fiscal/financial policies that then distort the crap out of foreign exchange rates – and therefore goods’ trade).
Funny how little the services do for the US economy but how much they can devastate foreign economies by removing the capacity for production within themselves.
Almost makes sense to have many small sites of production and employ as many people as possible, as much as I hate paying $25 for a artisanal loaf of bread (as an example), maybe we are headed to a no trade world.
What???
Not Wolf,
Did you accidentally microwave your brain this morning? Your $25 bread example is idiotic manipulative bullshit. The $5 loaf of bread is made in the USA right now. And you can buy artisanal bread, made in the US right now, for not much more. Tariffs have zero impact on bread. Where do these stupid manipulative lies and idiocies about tariffs come from?
The news media who are filled with people that don’t actually shop for groceries themselves.
I’m convinced that you people don’t actually shop for groceries.
1. I have about 4 different artisanl bread stores near me and it ranges from $6-9 dollars per loaf.
2. You can go to any supermarket and buy their freshly baked bread for cheaper.
3. Even on the normal bread aisle there are plenty of artisanal options.
Depends on where you are. My local artisanal bakery sells small loaves (petit pain) for a buck. Bigger loaves are proportionately more. This is Miami Beach so not a cheap locale generally.
Yup and many bakeries have day after or less fresh alternatives as well. There is nothing wrong with them you just microwave them wrapped in a paper towel and boom… Moist
Like I said, I think most of these people have never actually shopped for groceries
I was at a loss as to what to get the missus for our anniversary but thanks to this thread, no more. Bread machine!
Earthbound,
How about with an attached coupon that promises the holder that you personally will make the first 100 loafs of delicious bread, served fresh daily?
I know some people who are super savers. My guess is that some folks here are too.
To me, it can easily become a pathology. I can get sustenance and shelter / energy for the lowest possible cost (sometimes leading to poor health outcomes?) and every other little thing? RIPOFF!
I, on the other hand, have been a drunken sailor with some things. In some cases I blame parenting: my kids need (or want) stuff and I buy it. Also? I like to enjoy life, so I occasionally splurge.
For regular purchases? I try to narrow in a balance of price and quality.
Also: Americans are deluded into thinking we “deserve” fresh raspberries in the Rocky Mountains in January… and if they are not top notch (and cheap!!!), the system sucks.
I actually realize it’s a bit of a miracle to get a product like that (usually from Mexico or the EU) at all in my climate… but it’s a fresh fruit my kids will eat.
It’s all an America problem, though. Get an actual bakery loaf in most of Europe for 0.5 Euro. Bread doesn’t need to cost as much as everyone here charges, whether it’s a grocery baker or artisan.
Yes the price gouging was blatant back in the free money days. I remember the furniture store commercials when they were selling sofas for 3000 then 18 months later putting them on sale for 2000 plus a 500 dollar coupon. Blatant gouging days are over.
And it was hopefully an expensive lesson learned for our so-called leaders, that giving out free money doesn’t work. All it does is hands money to the providers of goods and services. The buyers don’t end up better off.
What kind of controls are on how the Fed can spend money received from tariffs?
Who decides how to spend that money?
1. Congress, as always, decides how money gets spent.
2. The money received from tariffs goes into the general budget and reduces the amount that needs to be borrowed to fund the deficits. It will reduce the amount of borrowing. That’s all it does. But that’s a big thing.
“1. Congress, as always, decides how money gets spent.”
God help us all.
The G’s record on macro for the last 60 years is little short of horrific.
Given the choice between short-term discomfort and long-term cancer cultivation, the G almost always has chosen the latter.
Ultimately the public is to blame, but a *lot* (a ***lot***) of “elite” effort has gone into shaping/narcotizing that public opinion.
“The money received from tariffs goes into the general budget and reduces the amount that needs to be borrowed to fund the deficits. ”
Or allows Congress to reduce money received from income taxes while keeping the deficit the same.
The US populace does not seem to get this. On one hand we all work hard to spend less than we take in regardless of where the income comes from; generally speaking we do “the math” for our own households. On the other hand we put up with the government doing exactly the opposite. We hear about it; about half of us are pissed about it; then we tolerate it; and we go right back to staring at our computers, tablets, smart phones etc. Trump and DOGE are trying to be tough fighting back but the politicians (from both sides of the aisle) want to protect their power and money bases; at all cost. When we are going to enact TERM LIMITS? Let’s stop messing around and DEMAND this NOW… not later. I had the overused term of “Wake Up America” but it fits.
Could not agree more but I think the vast majority of the population would not tolerate the steps required to get back to a balanced budget. We elect these people and they simply become another cog in the political machine, incapable of enacting any tangible change and “playing by the rules” to at least get SOMETHING done. Short of a revolution or total collapse, I don’t see a reality in which we vote our way out of this problem. The candidates capable and committed to the required change are unelectable, and the ones who are electable are totally ineffectual. Look at the absolute panic and sheer resistance that DOGE faced. And even with their extensive effort, they made what was an almost imperceptible dent in spending. Couple this with the fact that the country is basically split down the middle on how to solve these issues.
The problem is that no one actually wants anything cut that will affect them.
Everyone just hopes that they can kick the can down the road forever, based on debt spending, and hope that they die before the chickens come home to roost.
Nobody actually thinks this is sustainable, they just think it’ll outlive them.
Term limits will only solve part of the problem. The voters will still choose whoever is offering them the most benefits and protects their interests.
“When we are going to enact TERM LIMITS?”
I broadly agree with you…but the scary thing is that the average tenure of the average Congress Rep/Huckster Sociopath is *already* only about 8 years (before they get electorally off’ed or cash-in on their sell-outs).
8 years ain’t much – how short might the term limit be – 4 years? 6?.
A very, very real danger is that term limits could *concentrate* the political sociopathy – very finite term = accelerated/worse sell outs to special interests.
On *balance* we *have to* try something new – but we have to be very, very careful/cynical about the results. And be ready to react.
“Trump and DOGE are trying to be tough fighting back but the politicians”
For God’s sake man! Look at the “big, beautiful bill” that Trump demanded and the politicians passed. The problem is people believe what politicians say and never, ever hold them accountable. Term limits has no effect on that.
Anyone who thinks DOGE saved the U.S. treasury money deserves to be laughed at.
DOGE “saved” money by counting money that was already going to be saved and then added on cuts done in an illegal way that are going to end up costing money.
Suckers are always defending the people that fleece them.
CACTI:
How, pray tell? How do we leverage this “demand”?
I have noticed these problems since infancy.
I have also noticed that our “election system,” may be… flawed?
The first presidential election I was old enough to vote in was decided by the supreme court, based on one state/ “hanging chads.”
Basically every presidential election since seems to eerily come down to one state or district.
I am not a conspiracy theorist but the abuse and perverted nature of the system, as compared to the “constitutional ideal” is just blatant and seemingly un-changeable.
Prove to me that “things are not as they seem”?
Proving a negative is illogical.
The U.S. can be more creative than selling its birthright for a mess of pottage (becoming a financial hostage to the Pacific Rim), indeed, its Western plantation (“the capital account reflects net change in ownership of national assets”).
To be effectively competitive in foreign markets, requires that we sell lower unit costs and higher quality products. This means concentrating on production, innovation, and product quality. It means giving workers a financial stake in increased productivity (share in profits, etc.).
“a mess of pottage”
Amazingly, in practice, this has meant buying iPhones at 10x the Android price…with 2 year upgrade cycles (“Photo resolution 15% better!!!”).
And I’m only partly kidding – the trade deficit with China is hugely concentrated in a pretty small number of industries (China is kicking our ass in all of them…but only a tiny handful really matter numerically).
“It means giving workers a financial stake in increased productivity (share in profits, etc.).”
My friend’s wife started at Costco 25 years ago barely speaking English(she’d Brazilian). He was an electrician and tightwad that lived meagerly and did very well by putting all excess earnings into an annuity.
Now he’s retired and she still works at Costco. Her employee stock compensation has made her more than financially secure. She was all in on Costco stock when she started in 1994 and never looked back. They lived within their means and now live in Santa Ynez in a free and clear home with a ton of savings.
The problem with many Americans is that they don’t want to make the sacrifice of actually working into a lifelong priority.
but she was lucky that she didn’t hitch her stock-options horse to any of the hundreds of big retailers, from Sears on down, that went bankrupt and wiped out all stock and stock options value.
Costco = bulk food!
Sears? No one even misses it.
If the plan is to reduce government borrowing and interest expense via Tariffs as opposed to higher income taxes or cuts to entitlements I’m all for it.
I think it’s pretty clear now politicians will not reduce spending.
Easy to avoid the Tariff Tax by simply buying less.
But I don’t believe it will work due to the Law of Diminishing Returns.
There is long way to go. Getting there from here will take a long time and a lot of patience, which seems to be in short supply. Goal is laudable while the strategy seems not well thought out. We will see how the world reacts, and what trade patterns change. The reporting outside the US has a different ‘take’ from WSJ, IMO.
The theoretical annualized amount is less than 10% of that two trillion, without considering the additional deficit from the current budget under consideration.
Wolf, isn’t the trade deficit in 1987 cited as one of the reasons for black Monday?
The deficit was about -3% of GDP.
Wolf if you are going to track revenues from tariffs, you should also track lost exports from countervailing tariffs, and revenue lost from people choosing not to buy American products, or choosing not to travel to the USA.
See my charts and articles on the trade deficit. They track exports just fine. All you have to do is read them. US exports of goods are small if you take out energy exports. Food exports are low-value and don’t really matter in dollar terms, though the farm lobby keeps making a big deal out of it. US exports of services include foreign tourists in the US. All this is tracked in my trade articles. All you have to do is read them. Click on this link to find out about US exports:
https://wolfstreet.com/2025/02/05/trade-deficit-in-goods-worsens-to-all-time-worst-in-2024-small-surplus-in-services-improves-overall-trade-deficit-worsens-by-17/
MitchV,
Fine, but when we are getting our ass kicked, bigly, in aggregate, for decades, on a net basis – roughly symmetrical tariff “harm” by definition hurts the US less.
I get your point, MitchV, but the pathologies of quasi-free trade (Yuan manipulation, a-ok!) have long since made a joke of free-trade idealism.
At some point empirical reality has to supplant ideological religious faith.
I agree tariffs could be absorbed with a hit to profits instead of not being passed on. But our economy for decades now is based on wealth effects and credit expansion. The contraction in earnings create a significant contraction in wealth effect creating, doom cycle. Pick you poison? Inflation or earning contraction. So far This week the algo is preparing for pop or drop! Inflection point is at hand. It’s like watching paint dry, today’s yen drop saved us equities from rolling over.
Wolf, is it to early to say that tariffs are not going to affect CPI/PCE inflation data? I saw some commentary saying that April PCE inflation numbers weren’t up due to US companies stockpiling on imports in advance. What’s your take on that?
All you have to do is read my articles, for crying out loud:
https://wolfstreet.com/2025/05/30/how-financial-services-a-market-plunge-in-april-and-a-historic-cliff-dive-by-recreation-services-messed-with-pce-inflation-today-but-a-snap-back-cometh/
I read that one, but it’s focusing on the services inflation, while what I’m wondering if you are seeing any signs (or lack of) of tariffs affecting goods inflation. E.g Federal Reserve Governor Lisa Cook raised some concerns today regarding the progress on inflation, saying recent lower readings could reverse after tariffs work their way through the economy. Given how much anti tariff propaganda there is in the news lately, it would be nice to see a rational take on this.
How many times do you want me to repeat this?
Thanks!
DM: Elon Musk goes nuclear on Trump in jaw-dropping tirade
Elon Musk went nuclear on President Donald Trump’s big, beautiful bill on Tuesday, calling it ‘a disgusting abomination’ and condemning lawmakers who voted for it.
20 Billion per month in extra revenue. What impact will that have on the Debt Ceiling deadline. That 20 Billion supports the TGA balance. Provides at least a bit of support. Maybe the new overdrawn date is end of August or early Sept ? Or is it not enough to matter.
Just my own anecdotal evidence. I became fed up with the Ridleys Family Markets grocery chain store in my small town. Barely stocked shelves, shabily treated employees, high prices, produce put out already expired.
I now drive 100 miles every 2 weeks to shop. My pleasant hybrid gets 40 miles per gallon. I listen to a book. Enjoy the drive. Get better selection, fresher produce, lower prices. Easily pays for my gas. The cost for me is time, but I have time. I spend $600/month on groceries – thats $600/month that Ridleys no longer gets from me. “Peanuts”, you might say. But everything happens on the margins. Everything ends up being the accumulation of millions of individual choices and weighing of costs and benefits.
I live in fort collins and we have a Costco. The amount of people from Wyoming is astonishing. Easily a 100 mile round trip.
I think people read way too much into things like that. I doubt most people who drive 100 miles round trip to go to Costco are doing a calculation of how much they’re saving compared to gas and mileage on their cars. I think it’s more just something to do, get out of the house.
For a while there, I was driving out to Costco Delaware to stock up on gin, as the MD stores don’t do booze (and the DE tax thing). I hate chores like that, but I hate getting gouged even more.
Also, sometimes, I’ll spend more to give it to an entity I don’t hate.
Good for you. If more people did this, we could Whip Inflation Now, at least grocery inflation. I am more lazy and don’t like shopping in grocery stores. But with Instacart, I can comparison shop online. They use all the stores except Trader Joes. Walmart is almost always the cheapest, but not always, and most fruit and vegetables at Walmart suck (I live in the Bay Area). My net after all delivery fees (I have none because I am an Instacart member), service fees, and 5% off using my Instacart credit-card is about 3% to 5% per delivery. I am not counting the money I save on wear-and-tear on my car, gas, and the cost of my extremely valuable time (lol), and, as I said, my sanity because I hate shopping in grocery stores. I should add that if you are a heavy tipper, it is probably not economical to use this strategy. Instacart uses tipping to guilt-trip the shopper to pay for some of its wage costs, like all businesses who allow tipping.
I fully support Trump’s tariffs. I just hope he doesn’t cave and actually follows through.
Right now the markets think it is one big bluff and he won’t do it.
How much of the tariff revenue is from IEEPA and how much is from other laws?
This is relevant since there is a fair chance that the courts will eventually make the government give the IEEPA money back…
‘Cause when life looks like Easy Street
There is danger at your door’ ~ R Hunter
“Total corporate income tax receipts amounted to only $507 billion in 2024, or about 12.5% of the $4.1 trillion in pre-tax corporate profits“
Yet, all I hear noise about is how out of hand the US corporate tax rate is! The rate is “21%,” and clearly there are ways to mitigate that.
Also: the greatly hailed haven of Ireland is a 12.5% rate.
Next, I wonder about the effective tax rate of the highest earners of these entities. Likely even more “mitigated.”
It goes back to the free money storm. When it happened I noticed that certain entities (that would appear to have lesser need?) were awarded huge sums. (PPP/ SBA specifically).
My theory is the system design: those who have mega teams in place can navigate the complexities of the system much more effectively than mom n pop. There’s also more apparent willingness, as a prevailing mom/pop attitude is to “only utilize the resources necessary, to allow them to be available for those who really need it.”
Some reporter asked Trump about not paying any federal income taxes one year. Trump replied that it was smart to not pay taxes. This is the correct answer. If the government wanted people like him to pay taxes, they should change the tax laws.
And some days now I think I fell down the rabbit hole, watching, hearing and seeing the insanity where they keep doing the same thing and expecting a different outcome.
This whole article is less a commentary on tariffs and more and indictment of just how bad the U.S. is at taxing the corporations that primarily reside inside the country.
Wolf provides stunning value. Try to find the tariff income for May 2025 that has been reported elsewhere. Wolf should be flattered that my AI attempts led back to Wolf Street for this data jewel.
The Treasury Department reports it too, but it’s not easy to find. I find it remarkable that the mainstream media is silent about this.
Wise folks read Wolf.
WSJ front page has it….
Well, the more you tax something, the less of something you get.
Tariffs won’t even come close to making a dent in all the new spending Trump is proposing like tax cuts for the wealthy and the new Star Wars madness. The sky’s the limit for deficit spending under this administration. And this is before you even factor in stuff like reported huge losses in government productivity due to indiscriminate cutting by DOGE that ends up costing far more than it saves, and especially before intangibles like gutting US scientific research funding which basically will cede our position of global leadership in the sciences.
But they will create a good dent – US imports 4 tn and if Trump manages av average 8% rate we are taking of 300bn annually or 3tn on 10 year period
Adjusted for gdp growth loss this is a 2th dent
🇺🇸 Top U.S. Import Partners by Value (2024)
Rank Country/Region Import Value (USD) Share of Total Imports
1 Mexico $506 billion 15.5%
2 China $439 billion 13.4%
3 Canada $418 billion 12.8%
4 European Union ~$500 billion ~15.3%
5 Japan $147 billion 4.5%
6 South Korea $116 billion 3.5%