Admitted, this is very rough ballpark with a little help from our AI friends, but let’s assume Mr. Trump does an amazing deal with all countries and gets all imports now taxed at 10%, which he says is the minimum tariff rate. Given we imported about $4T in 2024, let’s assume we’ll now get $400B. And extending the Trump tax cuts is supposed to “cost” us $3T over a decade, so $300B/yr. That means that Mr. Trump net is going to tax us $100B more a year than the Democrats would like to tax us. Make America Poorer Again! How about no tax increases?

Are there dynamic effects that will make this better on the tax cut side? You betcha. But am I ignoring all the export production that will start taking advantage of opening up in foreign markets? Yes, but remember that we are already at pretty much full employment, and the Trump plan is to restructure the economy. That means we have to reduce production somewhere else in the economy to free up resources for Mr. Trump’s favored industries. And let’s not forget the significant rent-seeking and political corruption costs on the tariffs.

The anecdotal reports of the slowing economy keep coming in. I’ll quote what an alum said in the comments to our last post to make sure it’s seen:

But it’s hard for me to view the start of his second term positively in light of his administration’s tariff chaos/nonsense. My work relates to business consulting, and it has been amazing to see the extent to (which) transactions have dried up because people have no idea what tariffs will be tomorrow, except that they’ll likely be higher. 

I don’t really think we’ll go into a recession, but I do think a more stagflationary future is coming. Remember, the growth effects of his proposed tax cuts are all primarily in the economy, as he is proposing just extending the current cuts. Any additional cuts (e.g., tax on tips) is much less stimulative of economic growth, however much it may benefit a worker that gets that. That means the heavy lifting for Trump II has to be in the deregulatory space. It remains to be seen what he’ll get done.

I will say I do not find his UK trade deal framework encouraging, other than he got it done (i.e., the framework–the actual deal will likely be in work for months). Reports say that Britain will pay a 10% tariff across the board, including auto exports to the U.S. for the first 100,000 cars (what they currently send us), and they’ve agreed to buy ethanol and Boeing planes. Ask yourself the question–why are any specific goods being included as the focus of these trade deals? You and I know the answer–those special interests were driving this deal. Boeing and the farm lobby are huge on k-street.*

Trumpians will say I’m being unfair, since the foreign corporations will pay the tax. There are two responses. Of course if the foreign firms did pay all the tax, then there would be no incentive for domestic manufacturing to emerge, which is the stated goal of the tariffs. But more importantly, we have a lot of research on the the Trump steel tariffs in his first term, and those suggest that the entire tariff was paid by U.S. consumers. And in the long run, the tax is always paid by the consumer as the producer will exit the industry if its not making a normal profit. During Trump I, we lost seven jobs in steel using industries for every one job “saved/created” in steel and aluminum producing industries. Tariffs are for losers–and we are those losers. But the winners are the politically connected.

Finally, I always say when you see Donald Trump sounding like Bernie Sanders you better watch out. Last week Mr. Trump suggested our kids should have fewer dolls, since tariffs will increase costs of children’s’ toys. Sounds very much like Mr. Sanders 2016 campaign where he said Americans shouldn’t have as many choices in deodorant. Birds of a feather do flock together.

* Boeing spent almost $12M in 2024 on lobbying, and that is separate from any union activity.