Fact Check: USA will get rich from tariffs

The Claim: "USA will get rich from tariffs"

Introduction

The assertion that the United States will become wealthy due to tariffs has gained traction in various discussions surrounding trade policy. Proponents argue that tariffs can protect domestic industries, generate government revenue, and potentially lead to economic growth. However, the economic implications of tariffs are complex and often contentious, with significant debate among economists and policymakers regarding their overall impact on the economy.

What We Know

1. Economic Impact of Tariffs: Research indicates that tariffs can have both positive and negative effects on the economy. For instance, a report from the Tax Foundation estimates that tariffs could increase federal tax revenue by nearly $2.9 trillion over the next decade, with the April 2 tariffs alone projected to raise $1.5 trillion 7. However, other analyses suggest that tariffs may reduce the overall size of the U.S. economy in both the short and long term, as indicated by a study from Yale's Budget Lab, which found that the tariffs enacted would negatively affect U.S. real GDP 1.

2. Distributional Effects: The effects of tariffs are not uniformly beneficial across all sectors. A report from the Economic Forecast Project highlights that while certain industries may benefit from protectionist measures, consumers often face higher prices for goods, which can lead to a decrease in overall consumer welfare 2.

3. Global Trade Relationships: Tariffs can also strain international relations and lead to retaliatory measures from other countries, which may further complicate the economic landscape. For example, the imposition of tariffs has historically led to trade wars, as seen during the Trump administration, which resulted in increased costs for domestic industries reliant on imported materials 8.

4. Job Creation vs. Job Loss: While some studies suggest that tariffs could create jobs in protected industries, they may simultaneously lead to job losses in sectors that rely on exports or face retaliatory tariffs. The White House claimed that a global tariff of 10% could create 2.8 million jobs and grow the economy by $728 billion 4. However, these projections are often criticized for lacking comprehensive analysis of the broader economic repercussions.

Analysis

The claim that the U.S. will get rich from tariffs is supported by some sources that emphasize potential revenue generation and job creation. However, these claims must be scrutinized for several reasons:

• Source Reliability: The Tax Foundation, while a reputable organization, has been criticized for its pro-business bias, which may influence its analysis of tariff impacts 7. Similarly, the White House's economic projections may be viewed through a political lens, potentially overstating benefits while downplaying negative consequences 4.

• Methodological Concerns: Many studies rely on economic models that may not fully capture the complexities of global trade dynamics. For instance, the Yale study suggests that tariffs will reduce GDP, indicating that the net economic effect may be negative despite potential short-term revenue gains 1. The methodologies used in these studies should be critically assessed to understand their assumptions and limitations.

• Conflicting Evidence: There is a significant body of literature that contradicts the notion that tariffs will lead to wealth generation. For example, a report from J.P. Morgan highlights that while tariffs can boost domestic production, they also lead to higher prices for consumers and potential retaliatory tariffs that could harm U.S. exports 8.

• Need for Comprehensive Analysis: More nuanced analyses that consider both the short-term and long-term effects of tariffs on various economic stakeholders would be beneficial. Understanding the full scope of tariffs' impacts requires examining not only revenue generation but also consumer behavior, international trade relations, and the overall health of the economy.

Conclusion

Verdict: Mostly False

The claim that the U.S. will get rich from tariffs is largely unsupported when considering the broader economic implications. While some analyses suggest potential revenue increases and job creation in specific sectors, these benefits are often counterbalanced by negative effects such as higher consumer prices, reduced GDP, and strained international trade relationships. The evidence indicates that tariffs may not lead to the wealth generation proponents claim, as they can harm overall economic growth and consumer welfare.

It is important to note that the economic impact of tariffs is complex and varies across different sectors and timeframes. The reliance on certain sources, which may have inherent biases, and the methodological limitations of various studies contribute to the uncertainty surrounding this claim. As such, readers are encouraged to critically evaluate information and consider multiple perspectives when assessing the implications of tariffs on the U.S. economy.

Sources

1. Where We Stand: The Fiscal, Economic, and Distributional Effects of All US Tariffs Enacted 2025 Through April. Yale Budget Lab. Link
2. The Effect of Tariffs on the US Economy | Economic Forecast Project. Link
3. The Fiscal, Economic, and Distributional Effects of 20% Tariffs. Yale Budget Lab. Link
4. Fact Sheet: President Donald J. Trump Declares National Emergency. The White House. Link
5. How do tariffs work, and who will they impact? UChicago. Link
6. Tariffs: Estimating the Economic Impact of the 2025 Measures. Richmond Fed. Link
7. Trump Tariffs: The Economic Impact of the Trump Trade War - Tax Foundation. Link
8. US Tariffs: What's the Impact? | J.P. Morgan Research. Link
9. Tariffs and Their Global Impact: A Note from the Desk of our Chief Economist. Oxford Economics. Link
10. Assessing the tariff impact: How US tariffs will impact growth and industries. Julius Baer. Link