The CBO (Congressional Budget Office) projecst that increases in tariffs implemented during the period from January 6, 2025, to August 19 will decrease primary deficits (which exclude net outlays for interest) by $3.3 trillion if the higher tariffs persist for the 2025‒2035 period. This will also reduce federal outlays for interest by an additional $0.7 trillion. As a result, the changes in tariffs will reduce total deficits by $4.0 trillion altogether.
Those estimates are larger than the $2.5 trillion decrease in primary deficits and $0.5 trillion reduction in interest outlays that the CBO projected in early June in a report that examined the effects of the tariffs implemented between January 6 and May 13, 2025.
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Yes, sales tax will raise government revenues.
According to the World Trade Organization, here are the top 10 economies (sans the U.S.) and their tariffs against the U.S. in 2024, before Donald Trump was elected:
Country Simple Average MFN Applied Tariff (Total / Ag / Non-Ag) Largest Tariff Against U.S. Goods
China 7.5% / 14.1% / 6.4% 209% (AVE; typically on agricultural products like dairy or meats)
Germany (EU) 5.0% / 11.3% / 4.1% >1,000% (AVE; typically on agricultural products with specific duties, e.g., certain meats or dairy)
Japan 3.7% / 12.2% / 2.4% 457% (AVE; typically on agricultural products like rice or leather/footwear)
India 17.0% / 36.4% / 13.5% 379% (AVE; typically on agricultural products like alcoholic beverages or walnuts)
United Kingdom 3.8% / 9.2% / 2.9% 302% (AVE; typically on agricultural products like fish/seafood or vehicles)
France (EU) 5.0% / 11.3% / 4.1% >1,000% (AVE; typically on agricultural products with specific duties, e.g., certain meats or dairy)
Italy (EU) 5.0% / 11.3% / 4.1% >1,000% (AVE; typically on agricultural products with specific duties, e.g., certain meats or dairy)
Brazil 11.2% / 8.1% / 11.7% 55% (typically on non-agricultural products like express shipments or automobiles)
Canada 3.8% / 14.8% / 2.0% 570% (AVE; on over-quota dairy products like butter or cheese)
South Korea 13.4% / 49.5% / 6.5% 887% (AVE; typically on agricultural products like rice or beef)
MFN = Most Favored Nation
As you can see, if tariffs are so terrible for a country’s citizens, then why do all the advanced nations we trade with have so many tariffs against U.S. goods?
Who, exactly, has profited by these 1-way tariffs? (hint: not the U.S. working class. It’s mainly been Wall Street types reaping $trillions in labor arbitrage).
And how stupid has the U.S. been to outsource 1. defense electronics, 2. pharmaceutical manufacturing, 3. rare-earth metals and magnets, 4. computer chip manufacturing, 5. advanced machining manufacturing, 6. Ship manufacturing.
I thank the heavens above for Elon Musk, the petroleum industry, and even a narcissist scoundrel like Donald Trump.
(The Inflation Reduction Act could have been great in jump-starting U.S. manufacturing. Unfortunately, it was riddled with so much under-the-table graft & DEI regulations that no large manufacturer could make it work…)
Our World in Data provides weighted mean applied tariff rates (not simple averages) across all products, based on the World Bank’s World Integrated Trade Solution (WITS) system, which uses UNCTAD TRAINS and UN Comtrade data. These rates are weighted by import shares, reflecting the actual tariff burden on traded goods rather than an unweighted average across all tariff lines. According to Our World in Data (last updated January 2025, with data up to 2022), typical weighted mean applied tariffs for these countries are lower:
China: ~3.5% (2022, all products, weighted mean)
EU (Germany, France, Italy): ~2.7% (2022, trade-weighted average, per Penn Wharton Budget Model)
Japan: ~2.5% (2022, weighted mean)
India: ~6.0% (2022, weighted mean)
United Kingdom: ~2.0% (2022, post-Brexit, aligned with EU rates)
Brazil: ~7.5% (2022, weighted mean)
Canada: ~1.5% (2022, weighted mean, noting USMCA preferences)
South Korea: ~5.0% (2022, weighted mean)
These figures are significantly lower than the simple average MFN tariffs
Yes. Thank you for the data!
Canadian Dairy tarrifs only apply after a limit is reached. That limit has not yet been reached and as a result no tarrifs have been placed on USA dairy. Also, USA massively subsidies its own dairy system. Perplexity AI said as much as 70 percent of USA dairy farm income has been by direct and indirect government subsidies.
Maybe both sides need to level the playing field.
For the EU countries, threeremarks:
– The tarifs are way less than Trump proposes and targetted to protect groups.
– In most cases food related to indeed protect local farmers but also for security reasons to produce your own food.
– However, the amount of tax we pay in Europe is way higher than in the US. Tariffs are paid by regular people.
I have my serous doubts:
– Tarifs are taxes payed by regular citizens. Hence they will have 4 trillion dollars less in their pockets. This basically means they have less to spend.
– With less compition, prices will go up anayway
– For foreign investors, a stable market and certinty is a big thing. The US has become untrustworthy and unstable. Why would you invest billions if in 4 years another president goes a completely different way. Or Trump does.
– ICE is deporting a million people that would do these low payed jobs. The US does not have the free labour to fill these low paying jobs. Even worse, higher paying jobs are sarificed so people can glue sneakers or iron underwear. Somehow thats not more added value….
– In the past tarifs were already tried and failed. The US in the 30th and (slightly different setup) the UK when they left the EU. Both did not work.
Tariffs will make manufacture in the US more profitable, and thus more likely. I doubt this CBO estimate takes increased tax revenues from factories, their construction, and their employees into account.
When I was a child only luxury goods, and some raw materials were imported into the US. I’d like to see that again. The best way to achieve this would be for the world to go back to a gold standard.
Tariffs will not make manufacturing in US more profitable. Global markets allowed every US manufacturer and every customer to find exactly what they needed in terms of specs, quality and price. A US manufacturer will either have to pay the tariff on external component they needed, find a US supplier that did not choose in the first place (either for price or specs) or develop internally the component. Since US recognises international patents developing internally or find someone in US will not always work. And also hoping that all your non-US manufacturer will relocate production to US is delusional. Many critical components or reagents are location-locked with one or few plants extracting-refining-producing 90% of a given mineral,reagent,drug or component. A company that is producing worldwide with plants developed in decades will not double its production costs to develop a plant in an uncertain environment like the US. What if they spend billions and then tariffs are revoked overnight? What if they planned to build in California or Illinois but then the president deploys the national guard reducing access to highway and rail because of arbitrary inspections? No. Trump increased uncertainty and uncertainty is catastrophic for investments and profitable manufacturing.
And that $4T will be paid for almost entirely by the US consumer. And it will be even worse that that since US companies will raise their prices just as they did during the last Trump tariffs.
Many exporters will lower prices to retain market share. If they don’t, US producers will sell more, increasing US employment, and productivity.
Putting op an import wall was already tried in the UK. It works out slighly different..
With competition being more expensive, US producers will raise prices, simply because they can.
The uncertainty allone will cause people to stop buying.
The result for for instance car sales: People stop buying new cars, low incomes simply cannot, a bit higher income classes will go for more used cars. Hence the used cars will go up in price limiting even more people to buy a car all together.
Don’t you mean debt, not deficit?
Good question, but the linked source does say deficit:
“As of August 19, we estimate that the effective tariff rate for goods imported into the United States has increased by about 18 percentage points when measured against 2024 trade flows. We project that increases in tariffs implemented during the period from January 6, 2025, to August 19 will decrease primary deficits (which exclude net outlays for interest) by $3.3 trillion if the higher tariffs persist for the 2025‒2035 period. By reducing the need for federal borrowing, those tariff collections will also reduce federal outlays for interest by an additional $0.7 trillion. As a result, the changes in tariffs will reduce total deficits by $4.0 trillion altogether.”
That’s how deep in the red spending is after the extension of the Trump tax cuts is, even with the DOGE cuts, which recent government estimates say will result in 300,000 jobs lost in the federal government; salaries are not the main cost to government, and the efficiencies and services lost detract from citizen productivity too; how many discoveries, lives lost or bankruptcies made (from additional unchecked fraud from cutting the CFPB, for example) will there be? DOGE cut the meat as well as the fat from government. For now at least, it added to the unemployment roles; that’s a negative to the tax base.
However, the CBO is basically trying to pin a value on ever-changing Jello:
“What Assumptions Does CBO Make When Projecting Tariff Revenues?
When the Administration modifies tariffs through an administrative action, we assume that the tariffs then in effect will continue permanently without changes. We incorporate changes announced by the Administration after they are implemented. Thus, our projection of revenues from tariffs in effect as of August 19, 2025, does not include the changes in tariff rates announced in an August 21 joint statement with the European Union, the scheduled August 27 increase in the tariff rate on imports from India (by an additional 25 percent), or the August 29 suspension of duty-free entry for commercial shipments of less than $800.”
How can any business – domestic or foreign – plan around that and what’s the cost of being unable to? What’s the cost of losing imports from countries with a comparative advantage; e.g. Canada with its superior hard wood lumber vs. softer American lumber due to warmer temps here (homebuilders prefer harder wood) etc? What’s the cost of having Americans harvest American agriculture instead of cheaper & better migrant labor (farmers complain America workers don’t last a day doing what migrant labor does for years, no matter what the pay)? What’s the cost of inflation vs. the savings in the deficit over 10 years? From CBO:
“The increases in tariffs will make consumer goods and capital goods (the physical assets that businesses use to produce goods and services) more expensive, which will reduce the purchasing power of U.S. consumers and businesses. Those increases in costs will put temporary upward pressure on inflation.”
The CBO article is worth a full read.