I hope the Trump administration will watch my series on the tough truth about tariffs because Trump appears to be confused about how they work. Exhibit A:
I'm going to explain exactly why with five key points about why Trump's position on tariffs is incorrect.
1. Tariffs Are Not Paid by Foreign Countries
Trump has repeatedly claimed that tariffs are paid by foreign countries or foreign companies. This is precisely the opposite of reality. Tariffs are paid by the importer of a product or service, which drives up prices that are ultimately passed on to consumers. In other words, tariffs are not a tax on foreign countries—they are a tax on the American people.
What's worse, it's a tax that is not approved by Congress, which is the only body with constitutional authority to levy taxes. So when Trump says tariffs are a tax on foreign countries, he's either lying or ignorant. Either way, he's not telling the truth.
2. Tariffs Don't Bring Back Manufacturing Jobs
Trump claims that tariffs will bring back manufacturing jobs to the United States. While increasing our manufacturing capacity may be a fine goal, there are more effective ways to achieve this than through tariffs, which actually harm the economy.
Looking at Trump's tariffs of 2018, tens of thousands of manufacturing jobs were LOST in the following years. These ill-conceived trade policies also resulted in retaliatory tariffs by Canada on American products, which is why it's called a trade war. This made it even harder for American producers to be profitable as exporters. Furthermore, the economic instability and unpredictability of a trade war caused manufacturers and other producers to hesitate when considering whether to hire people and expand operations.
Let me be clear: there is no major sector in the U.S. economy where manufacturing is not already represented. We have robust manufacturing in all strategic sectors, including steel, gas, oil, petroleum, agricultural products, plastics, parts, and machinery.
It would be wonderful if tariffs actually helped manufacturing, just as it would be great if tariffs were truly paid by foreign countries. However, the historical record is clear: the results are exactly the opposite. Tariffs drive up prices, increase inflation, reduce wages, and increase unemployment—including significant losses in manufacturing jobs.
If tariffs created short-term pains for long-term gains, economists would be in favor of tariffs, but that’s not reality. Luckily there are other ways of increasing manufacturing such as lowering payroll taxes, lowering corporate taxes, reducing red tape and regulatory strangulation, offering subsidies, tax incentives, low-cost loans, and other favorable circumstances to promote and support American manufacturing jobs.
3. Tariffs Are Not (Really) Necessary for National Security
Trump argues that we need tariffs as a matter of national security. This is one of the more compelling arguments—but only if you're looking at the surface. Once we dig deeper, it becomes clear that importing certain products can actually be an intelligent and effective way of strengthening our national security.
Let's examine the steel industry, which is often cited as an example of the U.S. needing to be self-sufficient. First of all, our steel production is already robust—we produce essentially as much as we need.
In 2023, the U.S. exported 8.9 million metric tons of semi-finished and finished steel, mainly to Mexico and Canada. We import only approximately one-quarter of our steel and steel products, mainly from Canada, Brazil, and Mexico.
Let's turn this national security argument on its head: if the U.S. wants to maintain a competitive advantage and not deplete all of its natural resources and supplies of steel, it actually makes more sense to import from other countries so that we don't exhaust our own supplies. The U.S. could certainly stockpile reserves of materials deemed necessary for national security, similar to what preppers do. In other words, why consume all of your own food if someone else is willing to provide it?
Again, there are ways to strengthen manufacturing, including in sectors deemed important for national security, that are more favorable and superior to imposing tariffs, which the historical record shows is bad policy all around.
4. Tariffs Cannot Replace Income Tax Revenue
Commerce Secretary Howard Lutnick repeatedly lies about tariffs replacing the "Internal Revenue Service" with the "External Revenue Service." This would be amazing if tariffs actually worked that way, but as I've explained, tariffs are taxes on American consumers. So just calling tariffs by a different names does not change the fact that tariffs are NOT paid “externally” at all. I don’t know if Howie skipped his economics course in college (just like he happened to skip work at his Cantor-Fitzgerald office on 9/11) but he is quite ignorant about tariffs. Delusional in fact.
Not only are tariffs not paid externally, but the taxes collected as tariffs would come nowhere near enough to replace the income tax revenue collected by the federal government.
This is a tired argument referencing pre-World War I times when the majority of federal revenue did come from tariffs—paid by Americans, not foreign entities. It was a different world back then, my friends. In 1912, only 30% of the federal budget came from tariffs or "external revenue," and those tariffs were about 20% on imported products. There was a budget surplus in the federal government of about $30 million.
Let's look at the current numbers: In 2024, income taxes brought in $2.4 trillion to the U.S. government, about half of the total revenue collected of $4.8 trillion. The rest comes from payroll taxes, corporate taxes, capital gains taxes, admissions to national parks, and other sources. The U.S. spent $6.7 trillion, leaving a deficit of $1.83 trillion, meaning they overspent their budget. We don't necessarily have a revenue problem; we have a spending problem.
Further, how could tariffs replace that $2.4 trillion? Imports to the U.S. are valued at $4.1 trillion. Would Trump inflict a 60% tariff on all imported goods to generate the necessary $2.4 trillion?
It is just ANOTHER tax which is DELETERIOUS to the US economy, manufacturing, inflation, jobs and well-being of Americans. Sorry Howie, NO DEAL.
5. Tariffs Won't Necessarily Stop Drug Trafficking
Finally, Trump claims that tariffs will stop the flow of fentanyl. This has to be the most far-fetched argument for imposing these harmful tariffs. Are drug dealers importing illicit substances into the United States suddenly going to start paying tariffs on them? Will countries crack down on Mexican drug cartels because the price of imported American agricultural products is too high? Nothing about this argument makes sense to me.
If you want to crack down on drugs, there are other methods that don't involve taking a wrecking ball to the U.S. and world economy. The U.S. Drug Enforcement Agency outlines their tactics, which include nothing about tariffs. They mention investigating known fentanyl manufacturing areas, stricter control of internet sites advertising fentanyl, stricter enforcement of shipping regulations, and creating special teams to investigate leads on fentanyl trafficking. I don't see how imposing tariffs on Mexico, Canada, or China would achieve the desired effect.
As I've pointed out in this, my third video in my series The Tough Truth About Tariffs, tariffs unfortunately don't achieve their stated objectives. The historical record is clear: tariffs are not a tax on foreign countries or foreign companies, contrary to what Trump, Karoline Leavitt, and Howie Lutnick believe. Tariffs are paid by importers and ultimately passed on to consumers—you and me.
This clearly and repeatedly results in higher prices, higher inflation, higher unemployment, reduced wages, lower productivity, job losses, reduced competition, more instability and unpredictability. Tariffs are not needed to boost manufacturing or strengthen national security, and it is not possible to replace revenue from income tax with revenue from tariffs. There is no such thing as an external revenue service, except in Howie’s delusional dreams.
In short, with tariffs, everyone loses.
That’s why it’s called a trade war.
One could make the argument that Trump is intent on making trade so burdensome with our largest trading partners, Mexico and Canada, that it paves the way for a North American Union where we're no longer individual sovereign nations but one regional nation. This is moving us closer to what I call the "New World Disorder."
So these tariffs are pretty rotten apples.
I'm at your service to share this information. I'm personally fascinated by international trade and economics—it's an area I've studied in detail. I earned my master's degree in international policy studies and have always been curious about why certain economic policies and political systems result in prosperity, well-being, innovation, productivity, and peace for their citizens, while others lead to the negative outcomes I've described.
READ NEXT: BETTER THAN TARIFFS
I'll continue my series "The Tough Truth About Tariffs" and share more information with you to support my claims about manufacturing jobs lost in the wake of Trump's 2018 tariffs, which also resulted in retaliatory tariffs from Canada. It's been proven that free trade results in greater economic growth, boosts the economy, decreases inflation, increases jobs and productivity, and improves well-being and prosperity for the greatest number of people. Dare I say, free trade has proven to be an effective tool for promoting peace among nations.
It’s hard to argue the facts, but some people will try, when their cognitive dissonance does not allow truth to penetrate the false reality they have constructed.
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