I think was mentioned earlier but here is another explanation
You’re right. Good point, well made.
I understood his point. I erred in characterizing it negatively.
Good question. The Tax Foundation are conservatives, but they aren’t idiots. Any estimate by Heritage would be suspect, but the Tax Foundation is worthy of baseline trust. The calculation is an estimate of course, but at least it is apples to apples.
Ok, let’s check my opinion:
I’ll add emphasis:
Altogether, Trump’s tariffs will raise nearly $2.9 trillion in revenue over the next decade and reduce US GDP by 0.7 percent, all before foreign retaliation.
They are properly calling their estimate preliminary: they updated their model on April 4th to take into account new tariffs announced by Canada and China. Since there would be more retaliation moving forwards, we’d expect the reported figures to be underestimates. Effects of current retaliation follow:
As of April 4, China, Canada, and the European Union have announced or imposed retaliatory tariffs altogether affecting $330 billion of US exports. Imposed and threatened retaliation as of April 4 will reduce US GDP by another 0.1 percent.
So it’s reasonable to knock another 1/7th off from tariff revenue given the lower GDP estimate. More retaliation to come.
And here’s the narrow answer to SenorBeef:
We model the imposed tariffs together, accounting for interactions between the different rounds of tariffs. Revenue is lower on a dynamic basis, a reflection of the negative effect tariffs have on US economic output, reducing incomes and resulting tax revenues. Revenue would fall more when factoring in foreign retaliation, as retaliation would cause US output and incomes to shrink further.
On a conventional basis, before incorporating the negative effects of tariffs on the US economy, we estimate all the tariffs together would increase US federal tax revenue by nearly $2.9 trillion over the next decade. The April 2 tariffs on their own increase tax revenue by $1.5 trillion.
On a dynamic basis, incorporating the negative effects of the US-imposed tariffs on the US economy, we estimate all the tariffs together would raise $2.3 trillion over the next decade, about $505 billion less than the conventional estimate. Incorporating the negative effects of imposed and threatened retaliatory tariffs further reduces 10-year revenue by $85 billion.
So to sum up, the New York Times reported $3.2 trillion of revenue over the next 10 years, compared with ~$5 trillion needed to extend Trump I’s tax cuts. That number was reduced to $2.9 trillion after further work and reduced again to $2.3 trillion when economic responses were considered. Further foreign retaliation would reduce that further.
3.2/5 = 64%
2.3/5 = 46%
So the latest suggest that the tariffs will pay for less than half the cost of extending the old man Trump’s tax cuts from his first administration.
So what did we learn? The Tax Foundation indeed is conservative, but not idiotic. The New York Times will quote reliable sources, but unless you’re reading the Upshot column, will glaze over some of the granular stuff. And preliminary estimates are preliminary.
To see the mechanism read this post:
This is an accounting identity: the trade deficit is equal to the savings-investment gap. Here’s a primer:
This is tricky and requires some focus to grasp. It’s not quantum mechanics though.
Also, Coyne simplifies. Tariffs could improve the US trade balance by driving the economy into recession and thereby reducing consumption and increasing savings. Let’s look at the key formula:
Exports - Imports = National Savings - Investment
Yes, you could boost national savings by reducing the federal budget deficit. You could also boost it by enticing foreigners to buy our bonds. Because if we’re buying more goods from abroad than we’re selling (imports > exports) we need to be selling foreigners something more than we are buying. That something would be financial assets like stocks, bonds, and US real estate.
During the late 1990s and early aughts, China put their thumb on the scale by buying massive amounts of Fannie Mae bonds (and selling more goods to the rest of the world than China bought). While the West probably should have retaliated at the time, we didn’t. And that’s water under the bridge.
Because these tariffs will ultimately be charged by companies to American consumers, this is the biggest tax hike since 1968.
Maybe, but this isn’t clear. Tariffs could cause the dollar to appreciate, which would discourage exports and encourage imports. Tariffs on intermediate products would reduce exports directly. It’s not a guarentee (though I agree it’s a tendency).
In terms of the X-M = S-I formula, tariffs may increase S by reducing consumption, but foreign investors are fickle and subject to animal spirits, so that effect can be swamped by changes in foreign purchases or sales of US assets, not to mention changes in purchases of plant and equipment.
In this instance the dollar has depreciated, since the chaos of the Trump administration has dampened the tendency for the US dollar to be considered a save haven for foreign investors. I’d make a prediction at this point, except I don’t know what tariffs will be in June 2025, never mind June 2026, and trade flows operate with a lag anyway.
Thanks to all who have directly or indirectly replied to my last post. I am thinking about the implications.
Another fly in the ointment - supply chain disruption. Major manufacturers source components from all over the world. Do they bite the bullet and stay with a source at a 50% markup or go for a cheaper source country with limited capacity or unknown quality? The ports will continue to be in chaos with all the new regulations (hold it right there Steve - DOGE is cutting all this red tape 
) and accounting.
All the above theories and economic discussions are great. Trump’s never read them, maybe the schlub who took he tests for him at Wharton College did? Someone is driving the tariff train, not him.
The biggest piece of the puzzle we haven’t hit on so far is that the trade balance is not an especially important figure. Do you care about GDP growth? Great! Do you care about inflation? No problem!
Do you care about middle class and working class wages? Good! Unemployment? Productivity growth? Broad measures of economic progress? Gross National Happiness? All fine.
Secondary might be the share of employment devoted to manufacturing in an advanced service economy. You need to unpack that somewhat and consider that automation destroyed far more manufacturing jobs than international competition ever did. The importance of the trade balance requires further thought.
Nah, Trump is driving the train and his Yes-men are scrambling to come up with something consistent with Trump’s impulses. Josh Marshall:
We all know there is a persistent desire, need, insistence on figuring out the plans behind Donald Trump’s seeming chaos. But that whole enterprise is flawed. There is no more plan here than a giant worm consuming everything in its path has. It eats and it moves forward. That’s all there is. What you have is a man who can only understand relationships through the prism of domination. There’s the dominating and the dominated. And you want to be the first and not the second. He also thinks countries can only be great and rich if you make a lot of heavy industrial products. That’s where the thinking stops. There’s a lot of grievance and a general nostalgia about the 1950s. But that’s really where the thinking stops. There is no thinking really. There’s a set of impulses.
Minor anecdote to this point. My wife’s fab had been trying slowly to wean themselves off Chinese sources for their needs, at a noticeable increase in costs when they were already having troubles. The secondary sources they’d started to work with are now themselves subject to substantial additional increases due to the new tariffs, which may (they’re still studying) make it more likely to go back to Chinese sources, and otherwise further cut their US production of chips because it can’t be done economically enough.
IE as expected, counterproductive. Because there (no surprise) no US sources of what they need in the quantities they need.
And the Japanese market opens down 8%, with another huge rout on the Dow futures market. The markets are in for another day of Trump Magic™ tomorrow. S&P futures down 4%.
I’m trying to keep it relatively simple. 
Of course you’re correct - which I why I tried to throw an an all other things being equal qualifier. This can get complex.
It’s also possible the USD could collapse if countries, beset by so much mistrust of the USA, begin to abandon it as a reserve currency.
I’d say it’s a coin flip the NYSE has to stop trading midday.
Agreed, and I’m thinking the 1st breaker will trip before 10AM.
I tried to illustrate my work with a balance of trade chart from FRED, but it’s challenging to walk through it. First, there’s a break in the series, so you have to somehow splice ~~pre-1992 and post ~~1992. Secondly, I don’t know how to easily show the massive capital inflows from Asia, done to insulate themselves from another 1997 Asian crisis. So yeah, this stuff is tricky, but it’s not 2nd year physics or chemistry.
Honestly, you would think that higher tariffs would automatically improve the trade balance, but it’s just not that clear.
As Tokyo goes, so goes Seoul, down 5.5%; and Australia, down 6.3%.
Farmers in North Dakota and South Dakota are upset by the tariffs; say that the price for their produce will likely go down, because of counter-tariffs from the countries they sell to, and the cost of their inputs and machinery from Canada will go up.
Doug Sombke, President of South Dakota Farmers Union: :“This was just a horrible idea,” he said." Whoever thought that tariffs were good for the country, they really don’t understand civics and/or economics very well."
Note that:
North Dakota voters went 62.61% for Trump.
South Dakota voters went 69.93% for Trump.
Both states voted for tariffs.
Farmers should know: You reap what you sow.
https://www.cbc.ca/news/canada/manitoba/canada-us-tariffs-north-south-dakota-farmers-1.7502342
The equation released by the white house included a factor that accounted for falling demand due to increased prices. And they included a factor that accounted for producers swallowing the increased costs rather than passing them on to consumers.
Rather than calculate these per-country, or per-item, and in a non-linear way, they just fixed one factor to 4 and the other to 0.25 such that they completely cancel out in the equation.
Stand up maths posted a good breakdown video of this.
…lol that is so absurd. To go through the effort of adding real variables but then just giving exactly arbitrary values that cancel them out, you’re literally just adding complexity to give the impression you know what you’re doing.
In fairness, though Trump has talked tariffs for forty years and broached them in his first term, people have been caught off guard by his degree of insanity.
Also, farmers were very heavily compensated for certain previous tariffs, sometimes more than their costs. So some farmers thought these had been “paid for in advance”. They did not realize Trump would tell them “to have fun” selling their product when they grow more than they can sell in the US and their customers are livid.
I’m not justifying anyone voting for Trump, who I see as an egotistical grifter with sone charisma but unable or unwilling to put in the work to understand complex topics. Letting Trump be Trump and make difficult decisions unilaterally was never going to end well. But the idea this was all discussed during his campaign is generous; not that sure Trump knew last week what his final plans were.