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Economic Impact of New Tariffs on Canada, Mexico, China, and Europe

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Tariffs as Federal Income

1. Tariff Revenue from Canada, Mexico, and China

Using 2024 U.S. import projections (based on 2023 data from the U.S. Census Bureau and Trading Economics):

Country 2024 Est. Imports (USD) Tariff Rate Revenue Generated
Canada $420 billion 25% $105 billion
Mexico $400 billion 25% $100 billion
China $500 billion 10% + 10%* $100 billion
Total $305 billion

*China’s tariff is assumed to be a phased 10% + 10% (total 20%).

2. Tariff Revenue if Applied to All European Countries (25%)

The U.S. imported $620 billion from the EU in 2023. Assuming 3% growth in 2024:

  • 2024 EU Imports: $638 billion
  • Revenue at 25% Tariff: $638B × 0.25 = $159.5 billion

Combined Total Revenue (Canada, Mexico, China, EU):
$305B + $159.5B = $464.5 billion

Spending the Extra Tariff Income

1. Trump’s Promised Tax Reductions

Corporate Tax Cuts (21% → 15%)

  • Current Federal Corporate Tax Revenue (2023): $425 billion
  • Projected Taxable Income (2024): $3.2 trillion
  • Revenue Loss: $3.2T × (21% - 15%) = $192 billion

Individual Tax Cuts

  • Trump’s 2017 tax cuts reduced individual rates by 1–4%. A similar 2024 cut (assume 10% reduction in revenue):
    • 2023 Individual Tax Revenue: $2.6 trillion
    • Revenue Loss: $2.6T × 10% = $260 billion

Total Tax Cut Cost: $192B (corporate) + $260B (individual) = $452 billion
Tariff Revenue vs. Tax Cuts: $464.5B (tariffs) ≈ $452B (tax cuts). Nearly fully offset.

2. Other Spending Areas

Area Est. Allocation (USD) Purpose
Infrastructure $100 billion Roads, bridges, 5G networks
Debt Reduction $150 billion Reduce $34 trillion national debt
Military $50 billion Modernize nuclear arsenal, cybersecurity
Healthcare $50 billion Subsidize prescription drugs
Border Security $30 billion Fund wall construction, ICE operations

Who Pays for the Tariffs?

1. American Consumers

  • Historical Data:
    • A 2019 study by the Federal Reserve Bank of New York found that 92% of China tariff costs were passed to U.S. consumers via price hikes.
    • Peterson Institute for International Economics: U.S. households paid $1,200/year extra due to 2018–2019 tariffs.
  • 2024 Estimate:
    • Consumer Burden: 85–90% of tariff costs.
    • Annual Cost per Household: ~$1,500 (adjusted for inflation).

2. Import Vendors

  • Large Corporations: Walmart, Amazon, and Apple absorb 5–10% of tariffs (via supply chain optimization).
  • Small Businesses: Absorb 10–15% (lack pricing power).

3. Currency Manipulation

  • China’s RMB Devaluation: In 2019, China devalued the RMB by 7% to offset tariffs. A 10% devaluation in 2024 would nullify a 10% tariff.
  • Impact: U.S. tariffs become less effective, as Chinese goods remain cheap.

Conclusion

  • Tariff Revenue: Up to $464.5 billion could offset Trump’s proposed $452 billion tax cuts, but consumers bear 85–90% of costs.
  • Trade-offs: While corporations and individuals gain tax relief, households face higher prices, and U.S.-China trade tensions could escalate via currency wars.
  • Historical Precedent: The 2018–2020 tariffs reduced U.S.-China trade by $100 billion/year but failed to revive manufacturing jobs.
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