A $6 Trillion Trump Tax Increase?
Wall Street Journal
By The Editorial Board
March 31, 2025 5:40 pm ET
Financial markets have the shakes as President Trump prepares to launch his next big tariff salvo on Wednesday. And nerves are appropriate since Mr. Trump’s chief trade adviser, Peter Navarro, is boasting about what he says will amount to a $6 trillion tax increase from the tariffs.
“Tariffs are going to raise about $600 billion a year, about $6 trillion over a 10-year period,” Mr. Navarro told Fox News on Sunday. This is on top of $100 billion a year from Mr. Trump’s car and truck tariffs. He also tried to claim that “the message is that tariffs are tax cuts.”
George Orwell, call your office. In the real economic world, a tariff is a tax. If you raise $600 billion more a year in revenue for the federal government, you are taking that amount away from individuals and businesses in the private economy.
By any definition that is a tax increase, and the $600 billion figure would be one of the largest in U.S. history. It amounts to about 2% of gross domestic product, and it would take the federal tax share of GDP above 19%. The average since 1975 is about 17.3%. Democrats, who love tax increases, haven’t dared pass such a large revenue heist.
It’s possible Mr. Trump will walk back from this tax ledge, and Kevin Hassett, who runs the White House economic council, wouldn’t say on Sunday what Mr. Trump will do.
But what is clear is that the President is going to impose significant tariffs, and do so when the economy is slowing. The Atlanta Federal Reserve’s GDP Now estimate for the first quarter, which ended Monday, has the economy shrinking 0.5%. That volatile number will change as March data arrive, but both consumers and businesses have grown more cautious as they worry about the effect of tariffs.
This is especially worrying because the signs are that Mr. Trump thinks tariffs are worth the economic damage. The latest evidence is his weekend claim that he doesn’t give a hoot if prices rise on foreign cars. “I couldn’t care less, because if the prices on foreign cars go up, they’re going to buy American cars,” Mr. Trump told NBC News. “I hope they raise their prices, because if they do, people are gonna buy American-made cars. We have plenty.”
Somehow we doubt American consumers will feel the same at a dealer showroom. Mr. Trump’s 25% tariff on foreign cars, which goes into effect this week, will raise car prices by some amount. Foreign car makers might absorb some of the tariff cost, but some part of the 25% levy is sure to be passed on to American consumers.
Mr. Trump also ignores that U.S. car makers are also likely to raise their prices. If Hyundai raises the price of an export model made in South Korea, then Ford and GM may at first try to capture market share. But over time the U.S firms would be foolish not to raise their prices to increase profits, perhaps by some margin less than the increase on imported cars.
That’s what happened after Mr. Trump raised tariffs on washing machines in his first term. Washer prices rose nearly 12%, according to a 2019 study, and it didn’t matter where the machine was made.
As a political matter, Mr. Trump’s “I couldn’t care less” quote about price increases is likely to show up in Democratic campaign ads next year. Polling shows most voters don’t think Mr. Trump is focusing enough on reducing prices—64% say not enough in the CBS News survey released Sunday. Mr. Trump won’t be on the ballot in 2026, but you can bet TV ads will link Republicans in Congress to Mr. Trump and those comments.
The President’s ideological fixation on tariffs is crowding out rational judgments about the consequences. Americans are being told to accept the pain of higher prices, a slower economy, and shrinking 401(k) balances in the name of Mr. Trump’s project to transform the American economy into what he imagines it was like in the McKinley era of the 1890s.
We wonder if the working-class voters who are supposed to be the vanguard of the new GOP will feel as good about the pain as they try to make ends meet paycheck to paycheck.
By The Editorial Board
March 31, 2025 5:40 pm ET
Financial markets have the shakes as President Trump prepares to launch his next big tariff salvo on Wednesday. And nerves are appropriate since Mr. Trump’s chief trade adviser, Peter Navarro, is boasting about what he says will amount to a $6 trillion tax increase from the tariffs.
“Tariffs are going to raise about $600 billion a year, about $6 trillion over a 10-year period,” Mr. Navarro told Fox News on Sunday. This is on top of $100 billion a year from Mr. Trump’s car and truck tariffs. He also tried to claim that “the message is that tariffs are tax cuts.”
George Orwell, call your office. In the real economic world, a tariff is a tax. If you raise $600 billion more a year in revenue for the federal government, you are taking that amount away from individuals and businesses in the private economy.
By any definition that is a tax increase, and the $600 billion figure would be one of the largest in U.S. history. It amounts to about 2% of gross domestic product, and it would take the federal tax share of GDP above 19%. The average since 1975 is about 17.3%. Democrats, who love tax increases, haven’t dared pass such a large revenue heist.
It’s possible Mr. Trump will walk back from this tax ledge, and Kevin Hassett, who runs the White House economic council, wouldn’t say on Sunday what Mr. Trump will do.
But what is clear is that the President is going to impose significant tariffs, and do so when the economy is slowing. The Atlanta Federal Reserve’s GDP Now estimate for the first quarter, which ended Monday, has the economy shrinking 0.5%. That volatile number will change as March data arrive, but both consumers and businesses have grown more cautious as they worry about the effect of tariffs.
This is especially worrying because the signs are that Mr. Trump thinks tariffs are worth the economic damage. The latest evidence is his weekend claim that he doesn’t give a hoot if prices rise on foreign cars. “I couldn’t care less, because if the prices on foreign cars go up, they’re going to buy American cars,” Mr. Trump told NBC News. “I hope they raise their prices, because if they do, people are gonna buy American-made cars. We have plenty.”
Somehow we doubt American consumers will feel the same at a dealer showroom. Mr. Trump’s 25% tariff on foreign cars, which goes into effect this week, will raise car prices by some amount. Foreign car makers might absorb some of the tariff cost, but some part of the 25% levy is sure to be passed on to American consumers.
Mr. Trump also ignores that U.S. car makers are also likely to raise their prices. If Hyundai raises the price of an export model made in South Korea, then Ford and GM may at first try to capture market share. But over time the U.S firms would be foolish not to raise their prices to increase profits, perhaps by some margin less than the increase on imported cars.
That’s what happened after Mr. Trump raised tariffs on washing machines in his first term. Washer prices rose nearly 12%, according to a 2019 study, and it didn’t matter where the machine was made.
As a political matter, Mr. Trump’s “I couldn’t care less” quote about price increases is likely to show up in Democratic campaign ads next year. Polling shows most voters don’t think Mr. Trump is focusing enough on reducing prices—64% say not enough in the CBS News survey released Sunday. Mr. Trump won’t be on the ballot in 2026, but you can bet TV ads will link Republicans in Congress to Mr. Trump and those comments.
The President’s ideological fixation on tariffs is crowding out rational judgments about the consequences. Americans are being told to accept the pain of higher prices, a slower economy, and shrinking 401(k) balances in the name of Mr. Trump’s project to transform the American economy into what he imagines it was like in the McKinley era of the 1890s.
We wonder if the working-class voters who are supposed to be the vanguard of the new GOP will feel as good about the pain as they try to make ends meet paycheck to paycheck.
