For President Trump, tariffs are about winning. For U.S. companies looking at their third quarter earnings, tariffs are about losing.
That was the takeaway from the the latest earnings calls, during which many companies' officials discussed tariffs, and not in the context of how they were bringing in more money.
This should be a red flag for Trump, who claims to promote U.S. businesses and care about bolstering their earnings. Tariffs are doing just the opposite. They cost companies and consumers and they hurt the economy.
In response to such criticism, Trump has previously pointed to tariffs as revenue generators for the government. Earlier this fall he tweeted, “Tariffs are working big time. Every country on earth wants to take wealth out of the U.S. always to our detriment. I say, as they come, Tax them.” He added, “it means jobs and great wealth because of Tariffs we will be able to start paying down large amounts of $21 Trillion in debt.”
At first blush, that might make sense. Tariffs, a tax on imports, would bring money to Washington. But this oversimplified explanation misses a couple of key points.
For one thing, Trump’s tariffs weren’t put in place to raise money for the government. They were put in place to do almost the exact opposite, to boost U.S. business by pushing consumers to buy domestic goods, supposedly on national security grounds. More recently, the Trump administration's tariffs on lists of Chinese goods were meant to punish China for unfair practices including forced technology transfers and other practices. In short, neither Section 232 tariffs nor Section 301 tariffs were designed nor implemented with the goal of generating revenue.
Then there’s the actual economic issues. First up, the issue of substitutes. Right now, China is a primary target of Trump’s tariffs. But many things that the U.S. purchases from China are also manufactured elsewhere. If the U.S. companies source their materials from elsewhere, which may cost more, they will not pay a tariff on those imports. That means that those tariffs still cost consumers more, but they don’t generate any revenue.
There’s also the problem of lost sales. If companies can no longer sell their goods because tariffs make producing them too expensive, then the government wont collect anything on the tariffs.
Additionally, every tariff imposed by the U.S. has been met with retaliatory tariffs. Those tariffs further increase the pain already inflicted by those from Washington. These tariffs, of course, don’t generate money for the U.S. but, instead, any money that they do raise goes to the foreign governments that collect on them.
These realities, combined with government remedies such as bailouts for farmers suffering from tariffs, mean that the government isn’t bringing in the money Trump said it would from tariffs. Instead, the national debt has grown and companies, and perhaps the stock market, are beginning to understand firsthand that for all of Trump’s claims to tariff triumph, they have produced few gains.
So no, tariffs are not raising lots of money for the government — and certainly not enough to offset the losses to consumers and companies.