Where does tariff money go?

No political responses, please!

I get it that the US importer pays the tariff and that it will probably be passed on to the ultimate consumer, but where does the tariff money go? The general fund? Will it at least help balance the budget?

Unless specifically allocated by law, tariffs go into the general US Treasury fund.

In most cases it will be shared between various entities involved in the transaction depending on the nature of the market in varying proportions. For broad economy wide tariffs that tends to average out as landing pretty heavily on the consumer. Seller/importer, manufacturer (if that’s separate), and consumer all potentially have a role in absorbing the tariff, though. If the seller or manufacturer bears a decent chunk of the burden they might even try to pass some of it on to their employees given a long enough lead time.

Looking at the average makes sense if we’re talking about broad tariffs on all or most goods. Trade wars tend to spark some very directed tariffs on specific types of goods that presumably hurt the other side more. Those types of tariffs don’t necessarily fall out the same way as the average for a countrywide tariff. It can be problematic to assume that they do even if that’s the easiest assumption to calculate and express.

Yes-ish. I don’t know of any specifically allocated to something else.

It depends. They may not actually result in only small gains of tax revenue, or even a lost of tax revenue, after all the economic effects of intervening in the market play out. A higher tax per shmoo imported produces more revenue if the same number of shmoos continue to be sold. With higher taxes and higher associated costs we might well see fewer shmoos sold. Consumers might also be heavily substituting with shmoos from another country that suddenly became best able to provide low purchase prices because they aren’t included in the new tariff. To the extent that importers or their employees sometimes bear some burden we might also see decreases in income or corporate tax revenue. It’s reasonable to assume that new tariffs are met by new tariffs that affect our exports. That response has the possibility of affecting corporate and personal income taxes as another indirect result of the higher tariff.

As far as balancing the budget there’s a more important factor. Our federal tax revenue is dominantly from personal income taxes. Tariffs are a pretty minor revenue source. All excise taxes combined, which includes things like federal gas and tobacco taxes, is only a couple percent of total federal revenue. Even a tariff that shows a decent increase in revenue isn’t going to help the deficit in any major fashion.

Thanks, everyone. I figured it was more complicated than I had originally thought…

Of course, in many cases, the money doesn’t go anywhere, because the existence of the tariff makes the transaction unprofitable, and so the importation never happens.

Tariffs are meant to make goods imported from a particular country less competitive. One outcome is to permit domestic competitors to sell their goods at prices closer to the price of the imported goods + the tariff (i.e. US steel producers that are traditionally disadvantaged to foreign steel producers). Another outcome if there is no domestic competitor, is to make another countries competitor (not the tariff target country) goods more attractive, so that domestic importers will switch supply from the tariff target country to another country. The end desired result is to economically harm the target country.

If there are no other competitors in the market but the target tariff country, then it ultimately is just a tax on the domestic consumers.

It’s ALWAYS a tax on consumers.

At the founding of the USA, and up until the income tax was begun, tariffs were almost the principle sources of income for the government.

And if there are domestic competitors who can supply it, then it’s still a tax on domestic consumers. Because the consumers only have 2 choices - pay the tariff, or subsidize the domestic producers by paying more than we did before for the imported stuff.

And now it’s nearly an insignificant source of funds. Even with the increased tariffs, we’re talking less than 2% of Federal revenues.

And of course that is the concept behind high tariffs in a trade war.

Not always. Sometimes the company whose goods have been hit by a tariff will lower their prices to make their goods still competitive.

They can do that, of course; depending on the various economic functions they may have no choice.

But one way or another, ordinary schmoes will pay, because someone has to; there is no such thing as a free lunch. The government imposing a tariff on a good creates a cost. Maybe it gets paid by the direct consumer; maybe it gets paid by a few employees losing their jobs; maybe it gets paid by that specific good just selling less and an otherwise inferior but un-tariffed good replaciong it with all the economic inefficiencies that entails. Maybe the companies that import the good just aren’t as profitable, or they themselves buy less of other stuff, which means people in their supply chains don’t make as much money or employ as many people. I’m sure we could come up with a dozen more ways people will pay the tariff, but one for sure is they WILL pay.

You two need to learn to parse language better. While in most cases it will result in higher costs to domestic consumers, those aren’t always absolutes, nor are those the objectives of the tariffs. Their primary purpose is to put an economic burden on the targeted producing country, but at a cost.

I’m not in favor of the tariffs that the Trump administration has implemented, primarily because he’s picking favorites (certain industries) within the US that he’s attempting to support. The government shouldn’t be in the business of picking winners and losers in the market. It rewards companies that are inefficient. He’s buying votes with certain pockets of voters in various parts of the country.

But, in my opinion, the majority of the media has gotten the reporting on these tariff issues wrong.

Of course **TANSTAAFL. ** The best result is that it gets paid by the mega corp paying executives and shareholders less of a bonus.

What is the error in the reporting that you are referring to?

I still don’t understand what I wrote that you think is wrong, or what you think the media gets wrong.

I thought we weren’t supposed to make joke answers in GQ. :wink: