Drug Abusers and Trump's Trade Policies
The United States' increased use of tariffs under President Donald Trump has sparked concerns about an addiction to tariff revenues, as the government may become reliant on these revenues despite their potential negative impacts.
Tariffs imposed on imported goods generate significant government receipts, with revenues from taxes collected on imported goods reaching $152 billion in the first six months of the year, a significant increase compared to the same period a year earlier, which brought in $78 billion. This revenue can create a budgetary reliance on tariffs that may encourage maintaining or increasing them.
Economists warn that this reliance on tariffs could lead to a vicious circle, further increasing dependence on tariffs. Patrick Leblond, an aggregated professor, predicts that this could result in a significant increase in inflation in the United States due to tariffs in the long term.
Richard Ouellet, holder of the Chair in New Economic Challenges of Globalization at Laval University, predicts that protectionism is likely to be around for a while. He also mentions the potential development of partnerships with economic adversaries like China and India.
The American president plans more tariffs, notably on pharmaceutical products and semiconductors. This could lead to a decrease in the volume of products imported by the United States over the next few years. If the United States imports fewer products, tariffs will generate less revenue, creating a potential dilemma for the government.
Trump's administration has increased tariff rates multiple times, including an additional 10% on all countries and even higher tariffs on those with large U.S. trade deficits. This escalation can foster a cycle where tariffs become a sustained tool rather than a temporary measure.
The commercial partners of the United States can now more easily find alternatives, which could be very bad news for Washington on a geopolitical level. New tariffs have come into effect on exports from dozens of countries. However, Donald Trump has obtained concessions from some allies like the European Union and Japan.
Despite the potential negative consequences for the economy and trading partners, tariffs provide an immediate fiscal benefit and are politically appealing as they can be framed as protecting domestic industries and jobs. This mix of economic revenue and political appeal can drive persistent tariff use despite adverse consequences.
A new acronym, TFSDT (Trump Has Squeezed The Toothpaste Out Of The Tube), has been suggested to reflect the reality of the tariffs situation. The average rate on products imported by the United States will now fluctuate around 20%.
The One Big Beautiful Bill Act, which has lowered taxes, will likely decrease even more. To address this, it is likely that tariffs will be increased to generate additional revenues. This could further exacerbate the potential addiction to tariff revenues, as governments may become reluctant to reduce them despite the broader economic downsides.
- France, being one of the commercial partners affected by the increased tariffs, may consider alternative investments in other global markets, given the potential development of partnerships with economic adversaries like China and India.
- With the United States' reliance on tariff revenues growing due to the One Big Beautiful Bill Act, which has lowered taxes, there is a risk that governments may become addicted to these revenues and reluctant to reduce them, potentially leading to negative impacts on the economy and general-news coverage of the finance sector.
