President Donald Trump will speak before signing the executive order in his elliptical office on March 6, 2025.
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President Donald Trump says tariffs will make the United States “rich.” But those wealth will probably be far less than the White House expects, the economist said.
The final amount could have a major impact on the US economy, national debt to the tax cut package, and legislative negotiations, according to the economist.
White House trade adviser Peter Navarro on Sunday estimated tariffs would raise about $600 billion a year and $6 trillion over a decade. He said on “Fox News Sunday” that tariffs on cars would add another $100 billion a year.
Navarro made a forecast as the US plans to announce more tariffs on its US trading partners on Wednesday.
Economists expect the Trump administration’s tariff policies to generate far less revenue than Navarro claims. Total revenue for some projects is less than half.
“We’re excited to see the world of exploring the world,” said Mark Zandy, chief economist at Moody’s. “When you reach $100 billion to $2000 billion, you’re pretty lucky.”
The White House declined to respond to a request for comment from CNBC on tariff revenues.
“Psychic Mathematics” Behind Customs Revenue
There are major question marks in the scope of customs duties. This includes details such as quantity, duration, product and affected countries. All of these have a major impact on the total revenue.
The White House is considering 20% tariffs on most imports, the Washington Post reported Tuesday. President Trump has brought this idea to the trajectory of his campaign. The Trump administration may ultimately choose different policies, such as country-by-country tariffs based on each country’s respective trade and non-trade barriers.
However, the 20% tariff rate appears to be in line with Navarro’s revenue forecast, the economist said.
The US imported approximately $3.3 trillion in 2024. Applying a 20% tariff rate to all these imports will generate annual revenue of around $660 billion.
“It’s almost certainly mental mathematics that Peter Navarro does, and that mental mathematics skips some key steps,” said Ernie Tedesci, director of economics at Yale Budget Lab during the Biden administration and former chief economist for White House economic advisor.
Trade adviser to US President Donald Trump Peter Navarro speaks to report outside the White House on March 12, 2025 in Washington, D.C.
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That’s because accurate revenue estimates must explain the economic impacts of many of the tariffs in the US and around the world, the economist said. These effects are combined to reduce revenue, they said.
According to Tedeschi, the broad 20% tariff raises around $250 billion per month (or $2.5 trillion over a decade) when considering these effects.
There are ways to raise more money, but they will involve rising tariff rates, the economist said. For example, according to an economist at the Peterson Institute for International Economics, the 50% total tariff would raise about $780 billion a year.
That’s an optimistic assessment. They write that they do not take into account the decline in US economic growth due to retaliation and negative growth impacts from tariffs themselves.
Why revenue is lower than expected
Tariffs usually raise consumer prices. According to Yale Budget Lab, a broad 20% tariff costs the average consumer between $3,400 and $4,200 a year.
Economists said that if consumers were to spend more, they would naturally buy less imports. A decline in demand, they said, means that there are fewer imports from these imports and lower tariff revenues.
Robert McClelland, a senior fellow at the Urban Brooks Tax Policy Center, also said tariffs are expected to cause “a decline in economic activity.”
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For example, US companies that don’t pass customs costs to consumers at higher prices are likely to suffer profits (and their income taxes will drop), economists said. Consumers may pull back spending and further dent the company’s profits and tax revenues, the economist said. They said companies that suffered financially, they might fire workers.
Foreign countries are also expected to retaliate with their own tariffs on US products that hurt companies exporting overseas products. Other countries may experience economic downturns and further reduce demand for US products.
“If you get a 20% tariff rate, you’ll have a severe recession, which will undermine your financial situation,” Zandi said.
There is also a certain level of violations of tariff policy, likely with a notch due to certain countries, industries and products, the economist said. For example, when the White House imposed tariffs in China in February, it exempted its “De Minimis” imports indefinitely, with less than $800.
The Trump administration may also inject tariff revenue into payments of certain parties plagued by the trade war, the economist said.
President Trump did it in his first term: the government sent a $61 billion “relief” payment to American farmers, which was nearly all (92%) of the tariff revenues for retaliation fees from 2018 to 2020, according to the Council on Foreign Relations.
The economists said tariffs are likely to have shorter lifespans and dilute the impact of potential revenues. They are issued by executive orders and could easily be revoked whether they are President Trump or future presidents, they said.
“These tariffs are zero chances of lasting for 10 years,” Zandi said. “If they will last until next year, I will be very surprised.”
Why is this important?
The Trump administration signaled that tariffs would “be one of the biggest ways they could try to offset costs,” Tedeski said.
According to the Tax Foundation, the 2017 Tax Cuts Act signed by President Trump will cost $4.5 trillion over a decade. Trump is also seeking other tax credits, including no tax on tips, overtime pay or social security benefits, and tax credits on interest on American-made cars’ car loans.
If tariffs do not cover the full cost of such a package, Republican lawmakers will need to find cuts elsewhere and increase the country’s debt, the economist said.
