Tell these tankers to get themselves, get to it, we have wiped out most of their launchers. These ships should go through the Strait of Hormuz and show some guts, there’s nothing to be afraid of. They have no navy, we sunk all their ships.
- President Trump
The U.S. merchandise trade deficit hit a record $1.2 trillion last year, despite President Donald Trump’s promise to eliminate it by imposing the highest tariffs in eight decades on foreign-made products.
Thursday’s Commerce Department report represents the first full-year assessment of the president’s ambitious reordering of global trade. The persistence of the deficit in the face of steep new taxes on imports from China, the European Union and scores of other nations reflects the limits of Trump’s blunt policy tool.
As expected, the Supreme Court today nullified Donald Trump's signature economic policy this morning in a ruling that invalidated the president's arbitrary and capricious imposition of trillions of dollars of import taxes on our trading partners around the world.
Naturally, the President's response was to be presidential and call the justices fools and lapdogs for ruling against him on tariffs.
Back in August the president threatened the court stating that this ruling would: Literally destroy the United States of America.
Well, it's happened and in the long term we're all likely to be better-off for the ruling. Tariffs, on their own, are not likely to raise-up or destroy the country inasmuch as imported goods account for only about ten percent of our total economy. Because we are largely a service economy tariffs don't have much direct impact on things like education and healthcare. Manufacturing constitutes less than ten percent of the US economy.
Nevertheless, the imposition of import taxes at the sky-high levels the administration imposed are a tax on all consumers, business and manufacturers shrinking the country's Gross Domestic Product by an estimated .3 percent per year. If you put a number on that it amounts to roughly $90 billion a year in losses. That isn't insignificant but nowhere close enough to destroy America. It just raises everyone's cost of living, jeopardizes farmers, ranchers, small business and contributes to inflation.
So where is this all going to lead us? Too early to tell but I suppose there are companies for whom imports are a necessary part of doing business; and they're going to want a tax refund.
Meanwhile, I guess none of us are getting the tariff dividend we were promised and the income tax isn't going to be replaced by tariff revenue. Of course the DOGE dividend never showed-up in my checking account either.
Money talks, baloney walks.....
A lie gets halfway around the world before the truth has a chance to get its pants on.
-Winston Churchill*
*Attribution to Churchill is questionable. Still a good quote.
Greenland is a territory of Denmark; it does not seem really reasonable that the United States would attack and occupy a friendly nation.
- Vatican Senior Cleric and Archbishop of U.S. Military Services, Timothy P. Broglio
Yup, sometimes the king of bad predictions finds a truffle. I wasn't wrong after-all.
I suppose we'll have to see what comes on Sunday, Monday and thereafter.
They stole our oil, and we'll be selling large amounts of oil to other countries.
- Donald J. Trump
This relief will provide much-needed certainty to farmers as they get this year’s harvest to market and look ahead to next year’s crops. We’re going to make them so strong it will indeed be a golden age for farmers.
-President Donald Trump
*Speaking about the latest farm bailout resulting from White House tariff policy
We're going to shove the drugs up the nose of the gringos, and they're not even going to realize it.
- Former Honduran President Juan Orlando Hernández
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| Wikipedia |
The cynic in me wonders if perhaps pardons are for sale.
We're going to make a lot of money and we're going to cut taxes for the people of this country. It will take a little while before we do that, but we're going to be cutting taxes and it's possible we'll do a complete tax cut because I think the tariffs will be enough to cut all of the income tax.
- President Trump, April 27, 2025
The line from the White House Information Minister, various Cabinet Secretaries and the President himself is that we are awash in tariff revenue wealth. Millions, billions and trillions of dollars; all willingly paid by other countries. The president has even floated the notion about creating an External Revenue Service to collect the tariffs and replacing the Internal Revenue Service in collecting income taxes.
We were at our richest from 1870 to 1913. That's when we were a tariff country. Perhaps the president has drawn his inspiration from 19th century America immediately before the establishment of the federal income tax.
Of course if you know your American history when tariffs were the primary source of federal revenue government was much smaller; federal spending was barely two percent of Gross Domestic Product (GDP). Nowadays, federal spending is north of 23% of GDP. It would be impossible to rely on tariffs to meet current spending levels. Heck, we're already running ginormous annual deficits that are slated to increase further with the passage of recent legislation.
Tariffs (sometimes called a duty) are a tax imposed on imported goods and services. The tariff is not paid by other countries; the US import company is required to pay the tax. This makes imported goods more expensive to US companies and consumers. Consequently, domestic producers may benefit from reduced competition potentially protecting domestic jobs and industries. Decreased competition may also result in domestic producers raising their prices as we have seen in the steel industry.
In 2024 individual income taxes generated roughly $2.4 trillion in revenue to the government representing nearly half of all federal revenue. Because tariffs apply to the narrow sector of imported goods they would likely generate only a fraction of that amount resulting in ballooning deficits.
Furthermore, because tariffs apply to imports (as opposed to broad-based income) this would result in a disproportionate economic impacts with industries relying on imported materials or components being hit the hardest.
Tariffs also increase costs to domestic companies and consumers.
Conversely, if tariffs replaced the income tax your wages/salary would theoretically become tax-free. This shift would allow you to keep more of what you make. Sound appealing? As a trade policy tool tariffs are probably more effective than as a revenue generator.
The economic reality is the challenge of replacing income tax revenues with tariffs would require import taxes on a scale of enormity so high as to become disruptive to consumers, business, supply chains, trade relationships and the US dollar. They won't fix our country's persistent problem with annual deficits or balance the budget. The notion of issuing everyone a government check and calling it a tariff rebate is absurd. Tax the citizenry with import duties and then return a small piece and call it a tariff dividend? PT Barnum had a term for this so if you have a rational explanation I want to hear it.
Meanwhile, the best summation of this challenge can be found over here at the Tax Foundation. It's a short read of only a few minutes and worth your while.
Finally, revenues from import taxes have been growing for months, and the latest data shows that the U.S. has collected $130 billion from them as of August 15. That is $73.8 billion, or 131.2% more, than the same time last year. But that’s still far short of the $2.4 trillion federal income taxes brought in last year. The running totals are updated daily and can be found here at the Trump Tariff Income Tracker. You might want to bookmark this web page so you can follow along.
Bottom line? The math doesn't work.....
Tell Medvedev, the failed former president of Russia, who thinks he's still president, to watch his words. He's entering very dangerous territory!
-President Donald Trump
Russia is right about everything and will continue to go its own way.
- Former President Dmitri Medvedev
I never went to the island. Bill Clinton went there supposedly 28 times. I never had the privilege of going to his island.
- President Donald Trump
It can be a mixed bag. A weakening dollar, while potentially beneficial for some sectors, generally leads to increased import costs, higher inflation, and potentially higher interest rates. This can impact consumers through increased prices on imported goods and potentially higher borrowing costs. However, it can also make American goods more attractive to foreign buyers, boosting exports and potentially stimulating economic growth.
On the negative side of the ledger a weak dollar can lead to increased import costs. As the US dollar buys less foreign currency it costs more to import goods from other countries. Consequently this can lead to higher consumer prices in a wide range of imported products potentially fueling inflation.
If a weaker dollar does lead to higher inflation the Federal Reserve might raise interest rates in an attempt to curb rising prices. This would make borrowing more expensive for consumers and business impacting everything from mortgages, car and small business loans.
Is overseas travel on your agenda? A weaker dollar means your money doesn't stretch as far as it used to and travel becomes costlier.
On the positive side of the ledger a weaker dollar makes exported goods and services cheaper for foreign buyers. Potentially this can increase export demand and boost the competitive edge for American businesses. If there is an increased demand for US exports the can lead to higher production, job creation and overall economic growth.
And just like foreign travel is costlier for Americans the opposite is true for foreign tourists. A weaker dollar means that overseas currencies are stronger relative to the dollar making travel here more affordable.
Bottom line? US debt already exceeds $36 trillion. The passage of the Big Beautiful Bill, at a minimum, is going to increase Federal debt by $3.3 trillion; raising the debt-to-GDP (gross domestic product) ratio from 124 percent today, raising concerns about long-term debt sustainability. The mounting annual deficits would rise to 6.9 percent of GDP from about 6.4 percent in 2024. Confidence in the US continues to erode.
Owing to our dominance in trade and global finance the dollar has been the world's reserve currency. More than half of the world's exports are denominated in dollars, 60 percent of all bank deposits are denominated in dollars and 70 percent of all international bonds are priced in US currency. And 57 percent of the world's currency reserves - assets held by central banks - are held in dollars. All of this is supported by confidence in the US economy, our financial markets and our legal system.
President Trump is changing all of this; further spreading uncertainty.
Presently, foreigners own $19 trillion in US equities, $7 trillion in Treasuries and $5 trillion miscellaneous US credit; and investors are beginning to realize they might be over-exposed to US assets and their trust is beginning to erode.
If global investors continue to trim their positions the dollar's value could come under sustained pressure as the US becomes a less attractive place to invest these days.
Can’t you just shoot them, just shoot them in the legs or something?
- President Donald Trump
Probably not. Today is the regular filing deadline for individual taxpayers and the title of this post is purposefully misleading because if the White House succeeds in a 25% reduction-in-force at the Internal Revenue Service the probability of an audit will most certainly be reduced.
Using IRS published data audits of individual taxpayers has fallen by roughly two-thirds since 2010.
A decade and a half ago audit rates fell across all income levels. In 2010 for most of us the probability of an audit might have been about 1 in 100. By the time 2020 rolled-around it was even less.
Nowadays the probability of an audit is the lowest it's been in my lifetime.
If you are a high roller or a business the same holds true.
Consequently, lower audit rates result in reduced revenue to the treasury. In 2010 the IRS collected an additional $11 billion by means of auditing individual tax returns. For the 2019 tax year that had fallen to $4.5 billion despite higher overall income levels.
With the passage of the Inflation Reduction Act in 2022, President Biden planned to reverse attrition at the IRS by adding an additional 20,000 employees over the next decade. The goal was to increase enforcement spending by about $45 billion over that same decade in hopes of capturing an additional $125 billion in revenue over the same period. Naturally, the White House and Congressional Republicans have since rescinded or frozen spending on this initiative.
The Yale Budget Lab has estimated that planned reductions-in-force will result in a loss of gross revenues of anywhere from $395 billion to $2.4 trillion over the next decade. This loss of revenue adds to the deficit even as Elon Musk's claims the efforts of the DOGE are an attempt to reduce the deficit.
Revenue contributions aside, our tax code is basically a voluntary mechanism for collecting taxes. I submit my return based-upon my assessment and that of my CPA of the adequacy of certain deduction or tax preference items. If a taxpayer receive a nasty gram from the IRS challenging that assessment I can either pay-up or challenge it. If I lose my challenge it is likely I won't take the same or similar position in a future year.
Of course, if there is a steadily decreasing probability of an audit and subsequent rebuff I may be emboldened to be more aggressive about a filing.
Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.
- Judge Learned Hand
The president celebrated Liberation Day by announcing an avalanche of tariffs on dozens and dozens of countries. His plan has evolved. Tariffs to stem the flow of fentanyl across the border, tariffs to return all manufacturing to the US, tariffs to punish our adversaries, tariffs to punish our friends, tariffs to make us rich and prosperous and to return America to the late 1800s; a time when tariffs financed the government.
JP Morgan Wealth Management analyst Michael Cembalest had this to say - This borders on twilight zone territory.
To be clear, a tariff is a tax paid by an importer on a product or service originating overseas. It is a barrier to trade and a useful tool if applied selectively. A trade deficit occurs when a country imports more goods and services than it exports. In other words, the value of what the country buys from other countries is greater than the value of what it sells to them.
If imports > exports, it's a trade deficit
If exports > imports, it's a trade surplus
Is a trade deficit bad? It depends. Trade deficits in and of themselves are neither good or bad; its impact depends on what is causing it and what else is happening in the economy. If you are like me you likely have a trade deficit with your favorite grocery. Foreign trade frequently works the same way.
The administration's calculation of 'reciprocal tariffs' is flawed because it is not based-upon tariffs (a trade barrier) but on trade deficits (balance of trade). The calculation goes like this: The 'tariff rate' for each trading partner is a function of trade aggregates - specifically, the deficit divided by US imports, then divided by one-half, with a minimum of 10%.
Remarkably, no allowance anywhere is made for specific barriers such as actual tariffs, digital services taxes, value-added taxes or monetary policy. Furthermore, the value of services are omitted from the Trump calculation. Only the trade deficit in goods is measured. Avocados are quantified and the intellectual capital and contributions of a software engineer are not. Considering that our GDP (total economy) is 68 to 70 percent services this omission has left the economic community scratching their collective heads.
For example, Singapore is a relatively free-trade-oriented country, while Brazil makes considerably more use of tariffs and other trade manipulations. However, both end up with the 10 percent rate because of their goods trade balances with the US. By contrast, Vietnam, which exports a great deal to the US yet has worked to make its policies amenable to the US gets no credit for the effort. Trump announced a 46 percent tax on all Vietnamese imports.
In a recent piece published by Axios, flaws of this calculation reach all the way to Madagascar; a small, poor country with an abundance of vanilla. The US is a large and wealthy country with a sweet tooth; consequently, there is a natural trade to be made. They send us their precious vanilla pods, we send them dollars they need for day-to-day necessities.
By the logic of the Trump administration's reciprocal tariffs that's not a natural trade at all. To quote Commerce secretary Howard Lutnick on CNBC this is evidence of tiny Madagascar picking on us. Because it runs a trade surplus with the United States, Madagascar is being hit with a 47% tariff, not only on vanilla but also on everything else it exports to us.
Given that Madagascar has precious little need for US exports, that means in practice that the tariff has to be big enough to bring that trade deficit down to zero and stop Americans from consuming more than a thousand tons of vanilla every year. Or switch to domestically produced artificially-flavored vanilla.
So let's be truthful; a tariff is a tax on consumers. And while this tax won't be a problem for a billionaire it will be a costly annoyance to the middle class. It will be a burden to the aspiring middle class and devastating to everyone else.
Former Treasury Secretary Lawrence Summers said it best - It’s now clear that the Administration computed reciprocal tariffs without using tariff data. This is to economics what creationism is to biology, astrology is to astronomy, or "RFK thought" is to vaccine science. The Trump tariff policy makes little sense EVEN if you believe in protectionist mercantilist economics.
What they have to do is build their car plants, frankly, and other things, in the United States, in which case they will have no tariffs.
- Donald Trump
President Trump has said that there is a simple way to avoid his tariffs - move everything back to the US. His thinking is that this will single-handedly restore the manufacturing sector and create jobs.
Where to start? Visit a modern automobile assembly plant and you won't find a worker hefting and bolting a left rear wheel on a car with an impact wrench. Robots outnumber workers and the remaining jobs require a higher skill set and oftentimes a two year degree from a community college.
Domestic manufacturing reached its apex in 1979 at 19.6 million jobs. In the following couple of decades 2 million jobs were lost to automation. With China's entry into the global trading system another 6 million manufacturing jobs were displaced from 1998 thru 2010. Today, according to the Bureau of Labor Statistics only 8 percent of America's work force sees the inside of a factory.
Complicating this picture are tax policies that Increase the cost of raw materials such as steel and aluminum. And with an economy running at full employment we do not yet have a comprehensive immigration policy. Machines, software advances, and AI technology will continue to revolutionize manufacturing efficiencies. Wage support and employee benefits have been on the decline for decades - largely a consequence of a decline in union membership.
In his first term Trump tariffs on cheap Chinese goods made limited progress with a surge of 411,000 jobs before the COVID shitshow. Biden used a mix of subsidies and tax incentives surging manufacturing jobs to a peak of 12.9 million in 2023, only 110,000 above Trump's peak.
Reversing four decades of industrial policy overnight is a heavy lift - corporate America has seen global integration as the most efficient mechanism for producing what the American consumer wants.
Are CEOs ready to change their business model? Lower wage overseas labor has left domestic companies with extra cash; that has gone to shareholders in the form of dividends and the repurchase of shares - boosting share prices.
Trump's tariffs would amount to one percent of US gross domestic product (GDP); amounting to the largest tax increase ever. Imagine the impact on household finances and the ripple effect on the economy. No doubt tariffs are a mechanism to make it costlier to do business beyond our shores; nevertheless, it is a very blunt instrument and exceedingly difficult to reverse decades of complex assembly and supply chains between the US and our largest trading partners.
It costs $ billions and takes years to construct and populate any substantive manufacturing facility. It takes years to recoup those investments. Tariffs and presidents are much too transient for business to make that kind of risky bet. Stable long-term policy-making hasn't been the realm of American politics.
Meanwhile the markets are sending a clear signal they don't like the uncertainty. It will be interesting to watch this play out.....
In the short run, the market is a voting machine but in the long run it is a weighing machine.
- Ben Graham
Russia should 'introduce geopolitical disorder into internal American activity, encouraging all kinds of separatism and ethnic, social, and racial conflicts, actively supporting all dissident movements – extremist, racist, and sectarian groups, thus destabilizing internal political processes in the U.S. It would also make sense simultaneously to support isolationist tendencies in American politics'.
- Alexander Dugin - Foundations of Geopolitics, 1997
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