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With Fresh Tariffs Looming, One Economist Warns They're Just a Way to Fund Tax Cuts for the Rich
"The reality is that it's about tax cuts for the rich, paid for by import taxes on the American working and middle class," said Justin Wolfers, a professor of economics and public policy at the University of Michigan.
Feb 10, 2025
With 10% tariffs on all goods from China now in effect, economist Justin Wolfers wrote on X Sunday that U.S. President Donald Trump's "tariff-for-tax cut swap" is aimed at getting working Americans to foot the bill for his promised tax cuts.
The so-called "swap" is "very cleverly disguised populist policy that sounds like it's all about beating up on China to help American workers," wrote Wolfers, a professor of economics and public policy at the University of Michigan. "The reality is that it's about tax cuts for the rich, paid for by import taxes on the American working and middle class," he said.
The costs of tariffs, which are a form of tax applied on imports and can be used to support homegrown industries that employ American workers, are largely passed on to American consumers.
China has responded to Trump's tariffs by levying 15% tariffs on U.S. coal, liquefied natural gas, and other products. Tit-for-tat tariffs with China were a feature of the first Trump administration and many of the protectionist measures Trump imposed against China were continued under former President Joe Biden.
Trump has pushed for using revenue from higher tariffs to fund an extension of his tax cuts, according to Reuters.
"Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens. For this purpose, we are establishing the External Revenue Service to collect all tariffs, duties and revenues. It will be massive amounts of money pouring into our treasury coming from foreign sources," Trump said during his inaugural address.
The Congressional Budget Office estimated in spring 2024 that extending the expiring provisions of Trump's 2017 Tax Cuts and Jobs Act would cost $4.6 trillion over 10 years.
When Trump announced the 10% tariffs on China, he also signed executive orders mandating 25% tariffs on both Mexico and Canada, each of which were able to strike a deal that delayed the imposition of those tariffs.
Following the initial announcement of the suite of tariffs against China, Mexico, and Canada, Rep. Greg Casar (D-Texas), the chair of the Congressional Progressive Caucus, wrote that "instead of using tariffs to protect U.S. jobs, Trump is on an ego trip and is using tariffs to pursue petty fights with other nations while raising prices on Americans."
Meanwhile, more tariffs may be coming. Trump said while speaking with reporters on Sunday that he will impose a 25% tariff on aluminum and steel imports on Monday, according to multiple outlets.
"Any steel coming into the United States is going to have a 25% tariff," Trump said. "Aluminum too," he said, according to NBC News.
He also said that he plans to announce reciprocal tariffs on "every country" this week, per NBC News.
While Trump did not single out China when announcing his intention to impose tariffs on steel and aluminum, China—which is currently flooding non-U.S. markets with its steel and aluminum exports—is "at the heart" of these new promised tariffs from Trump, according to The New York Times.
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Even Those Who Believe Tariffs Are Useful Think Trump's Trade War Makes 'Zero Sense'
One economist warned the tariffs would amount to the "largest tax increase... that has ever been imposed" on working-class families.
Feb 03, 2025
The trade war that U.S. President Donald Trump launched over the weekend by announcing sweeping new tariffs on imports from Canada, Mexico, and China drew intense criticism from experts and analysts across the ideological spectrum, including those who believe strategically deployed tariffs can help protect domestic jobs and workers.
"Tariffs are a powerful, effective tool to deliver certain goals. But Trump's Canada/China/Mexico tariffs make zero sense. And even undermine tariffs' legit uses," Lori Wallach, director of the Rethink Trade program at the American Economic Liberties Project, wrote on social media late Sunday, expressing agreement with United Auto Workers president Shawn Fain.
Fain said in a
statement that the UAW "supports aggressive tariff action to protect American manufacturing jobs as a good first step to undoing decades of anti-worker trade policy," pointing specifically to the North American Free Trade Agreement (NAFTA) and its successor agreement that Trump negotiated during his first White House term.
The union does not, however, "support using factory workers as pawns in a fight over immigration or drug policy," Fain continued. "The national emergency we face is not about drugs or immigration, but about a working class that has fallen behind for generations while corporate America exploits workers abroad and consumers at home for massive Wall Street paydays."
The officially stated purpose for Trump's 25% tariffs on Canadian and Mexican imports and 10% tariffs on Chinese imports is to confront what the White House described as the "extraordinary threat" posed by the movement of migrants and drugs across the southern and northern U.S. borders.
But Wallach argued Sunday that using tariffs to address immigration and the flow of drugs "is like trying surgery using a saxophone—wrong tool!"
"After decades of an American trade policy run by and for the largest corporations and to the detriment of American workers, independent farmers, and small businesses, we certainly do need a new approach," she added. "But simply imposing 25% tariffs on Mexico and Canada and another 10% on China will not rebuild American manufacturing/create U.S. manufacturing jobs or raise wages. Particularly, if such tariffs can be axed, lowered, or upped at the president's whim for reasons unrelated to trade/jobs."
"While tariffs can play a constructive role in protecting U.S. jobs and enforcing labor and environmental standards when part of a strategic industrial policy, Trump's approach is neither strategic nor appropriate."
Trump told reporters late last week that he is "not looking for a concession" in response to the new tariffs, which prompted swift retaliation from Canada, Mexico, and China.
The announced tariffs, which are set to take effect on Tuesday, also shook U.S. and global equity markets as Trump threatened additional duties against imports from European Union nations and admitted Americans could experience "some pain" stemming from the trade war. Mexican President Claudia Sheinbaum said Monday that her country reached an agreement with Trump to delay implementation of the tariffs on Mexican imports for a month, reportedly in exchange for the deployment of 10,000 Mexican soldiers to the country's northern border.
Contrary to Trump's insistence that tariffs are paid by targeted nations, they are in fact paid by U.S. importers, who then either eat the costs or pass them on to consumers through higher prices. Economist Dean Baker noted that the new tariffs amount to "a tax increase of roughly $200 billion a year ($1,600 per family) that will overwhelmingly be paid by moderate-income and middle-income families."
"It is the largest tax increase on them that has ever been imposed," Baker wrote Sunday. "And retaliation from both countries is likely to impose additional costs."
Melinda St. Louis, Global Trade Watch director at the consumer advocacy group Public Citizen, said in a statement that "no matter the intractable problem, Trump's go-to playbook is to bully our neighbors through tariffs and to scapegoat immigrants."
"Instead of addressing the actual causes or seeking real solutions to the complex public health crisis surrounding fentanyl, Trump jumps to impose damaging and self-defeating across-the-board tariffs and to spout more hateful rhetoric that dehumanizes our immigrant neighbors," said St. Louis. "While tariffs can play a constructive role in protecting U.S. jobs and enforcing labor and environmental standards when part of a strategic industrial policy, Trump's approach is neither strategic nor appropriate."
"Using tariffs to bully countries to advance an anti-immigrant and anti-humanitarian agenda will do nothing to support U.S. workers and will make our immigrant neighbors less safe," she added.
The tariffs also drew backlash from the right-wing Wall Street Journaleditorial board, which slammed the president for launching "the dumbest trade war in history."
"Bad policy has damaging consequences," the editorial board wrote late Sunday, "whether or not Mr. Trump chooses to admit it."
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Trump Follows Through With High Tariffs on Canada, Mexico, and China
"It's 'tariff-ying' and nauseating to watch President Trump and his Republican allies in Congress celebrate as they impose tariffs that will raise costs for the rest of us," one advocate said.
Feb 01, 2025
U.S. President Donald Trump signed three executive orders on Saturday following through on his promise to impose 25% tariffs on goods from Mexico and Canada and 10% tariffs on goods from China, a measure that targets the nation's three largest trading partners.
The tariffs are set to go into effect on Tuesday, according toThe Associated Press. The orders contained no language allowing for the negotiation of exceptions; however, Canadian energy products including oil and gas will only face a tariff of 10%.
"Tariffs are an important strategic economic tool, but Trump's desire for a trade war with Canada and Mexico won't protect jobs, keep Americans safe, or bring down costs for families," Sen. Elizabeth Warren (D-Mass.) said on social media in response to the news.
"Instead of using tariffs to protect U.S. jobs, Trump is on an ego trip and is using tariffs to pursue petty fights with other nations while raising prices on Americans."
A White House Fact Sheet announcing the tariffs said that the crossing of undocumented immigrants and illegal drugs—including fentanyl—over the Mexican and Canadian borders "constitutes a national emergency under the International Emergency Economic Powers Act."
"President Trump is taking bold action to hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other illegal drugs from flowing into our country," the fact sheet said.
However, it is unclear exactly what actions the targeted countries could take to lift the tariffs.
U.S. voters' frustration with inflation has been cited as an important reason why Trump won the 2024 presidential election. Yet broad tariffs are expected to raise the prices of a variety of goods including Mexican produce, Canadian lumber, and car-making supplies that often cross both borders several times in the construction of a vehicle, according toNBC News. Companies that import goods or supplies will have to decide whether to swallow the costs or pass them on to consumers.
"Small business owners like me are working hard to keep up with high costs, provide for our families, and keep the economy running," Alex Bronson, who owns a construction business in Mount Clemens, Michigan, said in a statement shared by Unrig Our Economy. "But after promising to lower our costs, Republicans seem set to deliver the opposite. Because of these tariffs, we'll be paying higher costs for construction among just about everything else just to help Republicans in Congress and Donald Trump gift bigger and bigger tax breaks to their billionaire friends and big corporations. It leaves us all wondering: Who are our leaders in Washington really working for?"
Warren also warned that the tariffs could give unscrupulous actors the chance to engage in greedflation.
"I'm concerned that Trump will give cover to giant corporations to use his tariffs as an excuse to raise prices on working families—while doling out waivers to his buddies," she wrote. "We will hold him accountable."
Other Democratic lawmakers also spoke out against the tariffs and the way they were imposed.
Rep. Don Beyer (D-Va.) pointed to a new study finding the tariffs would cut into disposable income by approximately $1,250 per household.
"Trump's tariffs are a clear overreach of executive power, misusing authorities never intended for this," Beyer wrote. "The Constitution delegates trade authority to Congress. Trump's abuses of trade powers make it clear that Congress must act to restore the constitutional balance of power."
Rep. Rosa DeLauro (D-Conn.) said, "Instead of developing a comprehensive worker-centered trade policy that will bring jobs back to the U.S., President Trump is using the threat of across-the-board tariffs not on behalf of American workers and consumers but to advance his own extremist policy agenda."
The Peterson Institute for International Economics found in a recent analysis that tariffs would harm the economies of the U.S., Canada, Mexico, and China, but would be "catastrophic" for Mexico and could ironically increase the number of people who would want to cross the border into the U.S.
"Instead of using tariffs to protect U.S. jobs, Trump is on an ego trip and is using tariffs to pursue petty fights with other nations while raising prices on Americans," Congressional Progressive Caucus Chair Greg Casar (D-Texas) said in a statement.
"Everything Trump has done these last few days—from trying to shut down Medicaid to blanket tariffs and sanctions—has all been about helping himself and his billionaire friends. House Republicans will own increased prices for Americans, increased migration driven by sanctions, and an overdose crisis made worse by taking away the addiction treatment and healthcare people need," he said.
Labor and public welfare groups also criticized the tariffs.
"It's 'tariff-ying' and nauseating to watch President Trump and his Republican allies in Congress celebrate as they impose tariffs that will raise costs for the rest of us," Unrig Our Economy spokesperson Kobie Christian said. "Every time Americans pay more when they buy clothes, electronics, or shop at the grocery store, they should remember they're paying for the cost of tax breaks that Republicans in Congress and Donald Trump plan to give to billionaires and corporations. It turns out 'America First' means America's Billionaires First."
President of the United Steelworkers (USU) David McCall said in a statement, "The USW has long called for systemic reform of our broken trade system, but lashing out at key allies like Canada is not the way forward," adding, "These tariffs don't just hurt Canada. They threaten the stability of industries on both sides of the border."
Mexico and Canada have both threatened to retaliate in the case of Trump-imposed tariffs. The executive orders signed by Trump included a provision to respond in the case of retaliation. However, if the countries do retaliate, this could also impact U.S. businesses that sell products in the two countries, such as vehicles; electronics; and agricultural, energy, and industrial products, as NBC explained.
"No one—on either side of the border—wants to see American tariffs on Canadian goods," Canadian Prime Minister Justin Trudeau wrote on social media on Friday. "I met with our Canada-U.S. Council today. We're working hard to prevent these tariffs, but if the United States moves ahead, Canada's ready with a forceful and immediate response."
On Saturday, Trudeau added that he had met with his cabinet and the premiers of Canadian provinces once the tariffs were announced and would speak with Mexican President Claudia Sheinbaum and address the nation later in the day.
Speaking on Friday from Mexico's National Palace, Sheinbaum said her government had a "plan A, a plan B, a plan C, for whatever the United States government decides."
Once the tariffs were announced on Saturday, she wrote on social media: "I instruct the secretary of economy to implement Plan B that we have been working on, which includes tariff and non-tariff measures in defense of Mexico's interests. Nothing by force; everything by reason and right."
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