Yes, Tariffs Are Raising Prices
In an interview with Fox News on Sunday, Commerce Secretary Howard Lutnick bragged about the “amazing” revenue that the Trump administration’s tariffs are delivering to the U.S. Treasury.
“The tariff revenues are amazing: $700 billion a year,” Lutnick told Shannon Bream. “That’s just net new money the government never had before. You take that for 10 years, that’s $7 trillion.”
Ignore, if you can, the still bizarre (but increasingly common) sight of a Republican executive official bragging about how much money the federal government has extracted from the economy. Similarly, try to ignore Lutnick’s questionable calculation of how much revenue the tariffs will generate—the best estimates right now suggest they will generate between $2.5 trillion and $2.7 trillion over the next decade, not the $7 trillion that Lutnick claims. (But those estimates are tricky things, given the lack of certainty surrounding all of this.)
Focus instead on the obvious question that Lutnick’s claim ought to bring to mind: Where, exactly, is all that “new money” coming from?
All taxes are paid by someone, and President Donald Trump’s tariffs are no exception to that rule. The question of who pays and in what amounts is likely to become even more of a focal point in the coming days and weeks, as the White House follows through on its threat to hit imports from dozens of countries with higher tariffs starting on August 1.
Economic data from the past few months, during which the Trump administration hiked tariffs on goods from Mexico, Canada, China, and elsewhere, provide a preview of what’s to come after the August 1 tariffs hit: Higher prices for Americans.
That is, of course, what economists say tariffs do. Raising prices is really the only function of a tariff—which artificially inflates the price of imported goods to make them less attractive than domestic alternatives. Economists will also tell you that’s not the whole story. They say that domestic producers often raise prices as well, since imported competing goods are now more expensive. They also s
Article from Reason.com
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