Donald Trump made a new, big promise last week about tariffs — the latest in a string of outsized pledges to use tariffs to benefit the United States.

On his social media platform, he declared that he wants to create what he’s calling the “External Revenue Service” to collect tariffs and other revenues from foreign sources.

To be clear, that name itself is misleading: the overwhelming number of tariffs are paid by American businesses importing goods, not by external foreign sources.

The post is the latest in a long line of promises Trump has made about tariffs, which are at the center of his economic strategy. Those promises on tariffs will be hard to keep, economists say — and some even work against each other.

The goals for tariffs: revenues, jobs, and the war on drugs

One of Trump’s big tariff promises is bigger revenue. On the campaign trail, he told a Georgia crowd that “we will take in hundreds of billions of dollars into our treasury and use that money to benefit the American citizens.”

He also has repeatedly said tariffs would boost U.S. manufacturing. In that same Georgia speech, Trump said he would impose tariffs on cars made in Mexico. “We will put a 100% tariff on every single car coming across the Mexican border and tell them, the only way they’ll get rid of that tariff is if they want to build a plant right here in the United States with you people operating that plant.”

At a recent press conference, he also said tariffs could stem illegal immigration and drugs.

“Mexico has to stop allowing millions of people to pour into our country,” he said. “We’re going to put very serious tariffs on Mexico and Canada, because Canada, they come through Canada too, and the drugs that are coming through are at record numbers.”

These tariff goals are at cross-purposes

It sounds great — one simple trick to tackle drugs, debt, and jobs. But it’s hard to see how it could all happen at once.

“You can have a tariff for revenue or you can have a tariff for restriction, but you can’t have both,” says Erica York, vice president of federal tax policy at the Tax Foundation, a right-leaning economic think tank.

Since a tariff is a tax that American importers pay for goods from other countries, tariffs do bring in some revenue.

But Trump also wants tariffs to boost manufacturing. The idea here is to make, say, foreign cars more expensive, meaning Americans would buy fewer foreign cars.

This is where a big contradiction comes in: if Americans buy fewer foreign cars, tariff revenue goes down.

And that’s not the only contradiction York sees in Trump’s policy. If Trump threatens tariffs on Mexico or Canada and succeeds in getting them to crack down on immigration or drugs — that is, if Mexico or Canada changed their policies in order to get Trump not to tariff them — that would mean no additional revenue, and also no additional protection for American workers.

“The way the incoming Trump administration is talking about it is that they can have their cake and eat it, too. But that is just not the case,” York said.

NPR asked the Trump team to explain how tariffs can accomplish all of Trump’s stated goals. They didn’t answer specifically, saying instead that tariffs will “protect the American manufacturers and working men and women from the unfair practices of foreign companies and foreign markets.”

Higher prices and uncertain revenues

Trump’s tariff proposals go way beyond what he imposed in his first term. He has floated tariffs of up to 60% on Chinese goods, plus a proposed 25% on Canada and Mexico. He has even suggested a blanket 10% to 20% on all imports.

But even new, high tariffs wouldn’t raise the kind of revenue Trump seems to want. Trump has often pointed to the 19th century, a time before the federal income tax, as an era he admires.

“It’ll make our country rich,” he said at a December press conference, speaking with admiration about the days of former President William McKinley. “That was when we were at our proportionately the richest,” Trump said.

During the campaign, Trump even suggested he wanted to replace the income tax with tariffs.

Experts have said that would be impossible. Last year, tariffs accounted for just 2% of government income.

According to one analysis from the Peterson Institute for International Economics, the maximum revenue that Trump’s threatened tariffs could generate would be $780 billion. That’s around a third of the total revenue from income and corporate taxes, and also doesn’t account for the economic effects of higher tariffs, like higher prices and slower growth, not to mention retaliation from foreign countries.

Kimberly Clausing co-wrote that analysis and also worked in the Biden Treasury Department. She emphasized the tariff hikes would hurt lower-income Americans the most through higher prices — while at the same time, helping higher-income people receiving Trump’s proposed tax cuts.

“I think a cynical reading of what the Trump administration is suggesting is a bunch of regressive tax cuts that help those at the top of the distribution, that are paid for with the regressive consumption tax that’s going to hit the poor the hardest,” she said.

News Source : https://www.opb.org/article/2025/01/19/why-trump-s-tariff-promises-will-be-hard-to-keep/