Leaving aside the economic impact of tariffs vs free trade, what happens to the revenue generated from the tariffs themselves? I assume this goes into the federal treasury, but you don’t see this discussed at all in the context of the budget deficit etc.
Is this assumption correct, or is there some other process? If it’s federal revenue, how much are we talking about, based on tariffs announced to date?
Assumption correct, it’s just federal revenue like any other. The reason it’s not mentioned much in regard to the deficit is that it’s de minimis. US steel imports are something like $30bil, 25% of that isn’t even a rounding error in federal spending of $4tril+ and GDP of $18tril+.
Media also is occasionally sloppy and will say for the bigger tariffs proposed on China ‘$200 bil in tariffs’ when it’s correctly phrased ‘tariffs on $200bil in goods’ so like $20bil if 10% as proposed. And all those figures assume the tariffs won’t reduce trade in the goods taxed, which they also will.
This is worth keeping in mind also in the political to and fro about this, it’s very small in terms of the economy. It could escalate to a situation that isn’t small. It has market psychology effects beyond the current $ total, from the uncertainty. But it’s small amounts of money so far.
The whole point of a tariff is to reduce the import. But if it doesn’t work and the import remains the same, a 20% tariff on all imports from China would be $100 billion. That would represent less than 3% of the federal budget. It wouldn’t even pay for the tax reform passed by Congress last year.
Yeah, as others have said it’s just too small a portion of revenue for that to be a major news point or etc. Ages ago before concepts like free trade basically all major trading countries had very very high tariffs, and they were intended to be major sources of revenue for the state.
As the world became more interconnected and trade shifted to being integral to the economic functioning of all states (instead of being primarily the movement of “luxury” goods) tariffs (correctly) began to be seen as inhibitors of economic growth for all involved, and they were gradually winnowed down over time. Later on concepts of globalism and free trade kicked that process into hyperdrive.
The Federal government for example received significant portions of its funding on tariffs, and customs houses and administration over them were some of the most important civil service jobs (given out via the patronage system), due to the graft potentials (which were large and frequently exploited in the 19th century.)
I was surprised I couldn’t find a more recent breakdown on federal revenues even in a quick search, but this one from 2013 is the best.
Total revenue (2012): $2,470 billion
Income tax $1,160 billion
Payroll tax $840 million
Corporate tax $236 billion
Gasoline tax $39 million [typo for billion]
Tariffs $30 million [typo for billion]
Tobacco excise tax $16 billion
Estate & gift tax $11 billion
Airplane ticket tax $10 billion
Liquor excise tax $9 billion
That’s about 1% of total revenues. Tariffs have been at about 1-1.5% since 1950.