President Donald Trump is racing to secure trade deals and raise tariffs ahead of a self-imposed deadline. However, the impact of these tariffs remains uncertain.
Trump has given four main reasons for his tariff policy agenda: restoring America’s manufacturing prowess, growing US revenue, equalizing the balance of trade, and pressuring foreign countries into setting policies that benefit the United States.
Early indications suggest success in some areas, such as increased investment in US factories and a reduction in the US trade deficit. However, economists argue that tariffs are unlikely to lead to a major American factory boom, as revenue from tariffs is dwarfed by the massive budget deficit.
The federal government raises $3 trillion annually from income taxes, while imports total around $3 trillion worth of goods annually. To replace this revenue, tariffs would need to be extremely high – significantly higher than current levels or even the 60% to 70% threatened for some countries.
While some companies have announced investments in US factories, these decisions were made prior to or independently of Trump’s tariffs. Skilled manufacturing labor is scarce in the United States, making it difficult for factories to operate profitably.
Manufacturing jobs are not booming; in fact, they have declined since Trump took office. Tariffs may help restore some manufacturing in America but also limit revenue-raising goals.
Trump has made astronomical estimates about how much money tariffs can raise, arguing that they could bring in trillions of dollars annually. However, the reality is that tariffs have raised less than $100 billion since taking office, with monthly revenues around $20 billion.
The most significant problem with Trump’s tariffs is that they often don’t last long. The 25% tariffs on Canada and Mexico, for example, were designed to incentivize countries to reduce fentanyl imports. If successful, the tariffs will “come off,” reducing revenue-raising goals.
In conclusion, while Trump has made some early wins with his tariffs, the long-term impact remains uncertain. Tariffs are often contradictory in their goals, making it challenging to achieve all of them simultaneously.
Source: https://edition.cnn.com/2025/07/07/economy/tariffs-trump-deals-explained