One thing that is clear about President-elect Donald Trump’s plans for tariffs is that he aims to move quickly after he takes office.
But that’s perhaps it.
Rapidly changing signals on that topic caused a lot of market whiplash Monday following a Washington Post story outlining discussions among top Trump aides centered around a more limited set of tariffs that would be universal but only apply to what are deemed critical imports.
Just a few hours later, Trump himself weighed in to flatly deny the story, writing on social media that the story “incorrectly states that my tariff policy will be pared back. That is wrong.”
The back-and-forth led the US dollar index down and then back up on Monday morning in reaction to mixed messages.
Trump’s ongoing tariff rhetoric comes after a weekend where, as part of his endorsement of “one powerful Bill” to implement his early economic agenda, he again promised that tariffs would be deep enough to pay for his expensive tax cut plans.
He wrote that the trillions of dollars in shortfall “WILL ALL BE MADE UP WITH TARIFFS.”
The two scenarios — the desire for limited tariffs on one side and the equally strong desire to use tariff revenue to pay for big-ticket items — are ones that economic experts have long maintained are likely to be mutually exclusive.
Some in his orbit said the president-elect has been direct about his intentions.
“President Trump has been very clear what he wants to do with tariffs,” said Joseph Lavorgna, a former chief economist at the National Economic Council during Trump 1.0, told Yahoo Finance on Monday.
Lavorgna called the tariffs part of a comprehensive Trump agenda coming this year that includes other issues like energy and taxes.
President-elect Donald Trump speak at Turning Point’s annual AmericaFest 2024 in Phoenix on December 22. (JOSH EDELSON/AFP via Getty Images) · JOSH EDELSON via Getty Images
Currently, tariffs bring in only a tiny fraction of US revenue. A Congressional Research Service report found that in fiscal year 2024, the US collected about $77 billion in tariffs, largely reflecting the duties imposed during Trump’s first term and then maintained and added to by Biden.
That accounts for approximately 1.57% of total federal revenue and also doesn’t reflect the costs of tariffs born directly by the government. During Trump’s first term, the then-president paid billions to farmers to help mitigate their losses when China retaliated on agricultural products.
By contrast, the cost of extending Trump’s tax cuts alone is estimated by the nonpartisan Committee for a Responsible Federal Budget to cost somewhere in the neighborhood of $3 trillion over the next decade (or about $300 billion a year).
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And Trump is promising to use tariffs to pay for other new cuts as well, such as eliminating taxes on tips.
All told, a detailed analysis showed that Trump’s plans — including a universal baseline tariff and other additional tariffs — would bring in $2.7 trillion in revenue if implemented, a far cry from more than $10 trillion in new policy proposals.
The contradictory signals sent this past weekend continue a theme from the campaign where Trump often makes outsized promises around the revenue that tariffs could bring in in the years ahead while many in his orbit outlined less aggressive details — a reflection of the political realities and some of the economic unrest that could follow.
But the bottom line is that Trump will need his full suite of campaign tariff promises — and perhaps even more — if he is serious about covering the costs.
“The market is obviously signaling that they take Trump’s campaign promises very seriously,” said Henrietta Treyz, Veda Partners director of economic policy, in a live Yahoo Finance appearance on Monday morning.
She said that markets should be ready for steep tariffs from Trump and also noted that some of the incoming president’s tariff authority could be deployed in as little as 12 hours.
“So the street should be ready for that,” she added.
Ben Werschkul is Washington correspondent for Yahoo Finance.
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