In one question, the reporter said if state taxes rose on Trump’s golf clubs he might increase membership dues to help pay for the higher tax burden. Trump said “not necessarily.”
“It depends on the market, so passing it onto others is not something you would necessarily have to do. It depends on how we do it, and different countries will be tariffed differently,” he said. “There are some that make tremendous margins on us. You’ve got countries that are charging us margins of 200% and 250% and we charge them nothing and that’s not sustainable. I rather not mention the countries now, but I will if we win. It’s not going to be inflationary. It could even be the opposite,” he said, adding that tariff revenue will be used to reduce the debt. “We have all heard that deficits don’t matter, but I view it as profit and loss in a certain way,” he said about the country’s thinly stretched finances.
Trump has spoken numerous times about using tariffs to pay down debt. In the past, he spoke about using tariffs as a way to generate revenue in replace of income taxes.
“You bring (the national debt) down through really great economic growth and tariffs on these countries that are making all of our products,” Trump said. “If you put a 100% tariff on a country, they’re not going to want to pay that and they are going to build a plant here,” he said.
One example of this might be China automotive company, Polestar. Their EVs are tariffed at more than 100%. But even before this decision made by Biden in May to impose such a high tariff, Polestar’s were subject to a roughly 27% import duty. They are now making some Polestar models in Ridgeville, South Carolina.
In July, CPA’s chief economist Jeff Ferry modeled the potential impacts of the 10% tariff on the economy.
Read about CPA’s 10% Tariff Model here.
The model forecasts the results of this policy for key national variables and trade flows for 25 nations and regions worldwide. The tariff makes imports less competitive and domestic production of manufactured goods increases to take advantage of that. Increased domestic production leads to more jobs and more investment. The new investment and hiring in the goods-producing sector flows through to the services sector. As a result, the entire U.S. economy grows.
The model suggests that real (inflation-adjusted) gross domestic product rises by 2.86% from the pre-tariff level and manufacturing output rises by 4.77%. Employment rises by 2.8 million in both production and services. Wages also rise and the total effect is that real household incomes rise by 5.7%, equivalent to $4,252, a number that counters the $4,000 increase per household that some studies suggest would happen in year one of the tariff hike.
“Any economic model looking at the impact of tariffs must take into account the stimulus to domestic production, and the increase in domestic prices, if any,” said CPA chief economist Ferry. “In our model, the stimulus to domestic production generates increases in household incomes and jobs that far outweigh the price increases.”
Last week, the USTR finalized the four year extension of the Section 301 tariffs, imposed by Trump in 2018 and extended by Biden on May 14.
There is growing bipartisan support for maintaining those tariffs, which only target China. House Ways and Means Committee Chairman Jason Smith (R-MO-8) and Trade Subcommittee Chairman Adrian Smith (R-NE-3) emphasized the importance of these tariffs in protecting American workers.
Additionally, a group of Democratic Party Senators led by Sherrod Brown (D-OH) and joined by Bob Casey (D-PA), Tammy Baldwin (D-WI), John Fetterman (D-PA), Gary Peters (D-MI), Chuck Schumer (D-NY), and Debbie Stabenow (D-MI) had urged President Biden to maintain or increase these tariffs.
Trump Says Tariffs and Economic Growth Will Pay For Tax Cuts, Help Reduce Deficits
There’s a nearly $2 trillion fiscal deficit, and of course the record $1.12 trillion goods deficit. And one way to bring that down is to produce revenue via trade – also known as tariffs. To some, that’s a dirty word, Trump told an ABC news affiliate in Las Vegas this weekend.
“The word ‘tariff’ to some people, and not very smart people, but to those people tariff is a dirty word. To me it is not a dirty word, it’s the most beautiful word there is, Trump told KNTV-13 in Las Vegas on Sept. 15. “It’s not going to raise our inflation. All it’s meant to do is get us even,” he said.
Trump’s 10% universal tariff proposal has caused a lot of strife with some circles – namely ardent free trade aficionados and economists who say the tariff is a tax on the middle class, and will increase inflation.
(The recent fervor started with this Newsweek op-ed, which later got attacked on social media for daring to say tariffs would not cost Americans $4,000 a year as some economists have said. CPA defended the argument, garnering 1.4 million views on X, formerly known as Twitter.)
Trump said that his Section 301 China tariffs didn’t lead to inflation. “I did a lot of this already with China, charging them hundreds of billions of dollars in tariffs and we had no inflation, or essentially no inflation,” he said.
Around 2019, inflation did rise slightly above the Fed’s target rate, but it was still under 3%. Year-on-year inflation hit a high of 2.9% in June 2018, the first few months after the China tariffs began. But then in June 2019, the 12-month rolling inflation rate fell to 1.9%. When COVID-19 hit, everything went haywire due to lockdowns, record stimulus and money printing, sending inflation in June 2022 to 9.1%, but that had nothing to do with tariffs.
To listen to some economists, a 20% tariff on a $1,000 import means the price of that import is now $1,200. And next year it will go up another 20% from there, bringing the price to $1,440.
The International Trade Commission did a post-tariff price study on a dozen sectors impacted by tariffs. They found that prices rose on average 10% to 20% of the actual tariff. Meaning, a 20% tariff on a $100 good might have increased the price to $102 or $104, and not to $120. These price increases came down over time due to numerous factors – either sourcing from non-tariff markets, more production of the same good at home, or a stronger dollar eating into the tariff. For steel tariffs, prices rise or fall because steel is a globally priced commodity impacted by supply and demand. Solar prices today are below where they were when tariffs began due to oversupply in China, something economic models rarely, if ever, consider.
The KNTV reporter asked Trump if he was worried higher import prices would hurt businesses and consumers.
“What it’s going to actually do is take away the profit that these countries are making,” Trump said. “They are going to still make plenty, but they’re not going to make the kind of money they’ve made over the last 40 years. Mexico is making $230 billion from our deficit with them and it’s going to be much less. We have to do it because otherwise it’s not sustainable,” he said.
In the roughly 15 minute interview, Trump hinted that he would consider tariffs on cars coming from Mexico. In the past, he said he would do this for Chinese car companies, but this time he left it more open to interpretation.
In one question, the reporter said if state taxes rose on Trump’s golf clubs he might increase membership dues to help pay for the higher tax burden. Trump said “not necessarily.”
“It depends on the market, so passing it onto others is not something you would necessarily have to do. It depends on how we do it, and different countries will be tariffed differently,” he said. “There are some that make tremendous margins on us. You’ve got countries that are charging us margins of 200% and 250% and we charge them nothing and that’s not sustainable. I rather not mention the countries now, but I will if we win. It’s not going to be inflationary. It could even be the opposite,” he said, adding that tariff revenue will be used to reduce the debt. “We have all heard that deficits don’t matter, but I view it as profit and loss in a certain way,” he said about the country’s thinly stretched finances.
Trump has spoken numerous times about using tariffs to pay down debt. In the past, he spoke about using tariffs as a way to generate revenue in replace of income taxes.
“You bring (the national debt) down through really great economic growth and tariffs on these countries that are making all of our products,” Trump said. “If you put a 100% tariff on a country, they’re not going to want to pay that and they are going to build a plant here,” he said.
One example of this might be China automotive company, Polestar. Their EVs are tariffed at more than 100%. But even before this decision made by Biden in May to impose such a high tariff, Polestar’s were subject to a roughly 27% import duty. They are now making some Polestar models in Ridgeville, South Carolina.
In July, CPA’s chief economist Jeff Ferry modeled the potential impacts of the 10% tariff on the economy.
Read about CPA’s 10% Tariff Model here.
The model forecasts the results of this policy for key national variables and trade flows for 25 nations and regions worldwide. The tariff makes imports less competitive and domestic production of manufactured goods increases to take advantage of that. Increased domestic production leads to more jobs and more investment. The new investment and hiring in the goods-producing sector flows through to the services sector. As a result, the entire U.S. economy grows.
The model suggests that real (inflation-adjusted) gross domestic product rises by 2.86% from the pre-tariff level and manufacturing output rises by 4.77%. Employment rises by 2.8 million in both production and services. Wages also rise and the total effect is that real household incomes rise by 5.7%, equivalent to $4,252, a number that counters the $4,000 increase per household that some studies suggest would happen in year one of the tariff hike.
“Any economic model looking at the impact of tariffs must take into account the stimulus to domestic production, and the increase in domestic prices, if any,” said CPA chief economist Ferry. “In our model, the stimulus to domestic production generates increases in household incomes and jobs that far outweigh the price increases.”
Last week, the USTR finalized the four year extension of the Section 301 tariffs, imposed by Trump in 2018 and extended by Biden on May 14.
There is growing bipartisan support for maintaining those tariffs, which only target China. House Ways and Means Committee Chairman Jason Smith (R-MO-8) and Trade Subcommittee Chairman Adrian Smith (R-NE-3) emphasized the importance of these tariffs in protecting American workers.
Additionally, a group of Democratic Party Senators led by Sherrod Brown (D-OH) and joined by Bob Casey (D-PA), Tammy Baldwin (D-WI), John Fetterman (D-PA), Gary Peters (D-MI), Chuck Schumer (D-NY), and Debbie Stabenow (D-MI) had urged President Biden to maintain or increase these tariffs.
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