Name: 'Trump's promise that foreign companies would pay. . .turned out to be false': Economist on tariffs
Uploaded: 2025-09-01T10:12:36.000Z
Duration: 8 min 21 s
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President Trump is touting what could be a financial windfall for the United States, but at whose expense?

It's based on Trump's new tariff rates for various countries.

The Congressional Budget Office updated its projections and now estimates that Trump's tariffs could reduce the U.S. deficit by a whopping $4 trillion over the next 10 years.

He's a professor of economics and public policy at the University of Michigan.

So first of all, what do you think are the chances that the tariffs will actually last through 2035, which the CBO is basing its estimates on?

A close to no chance, and that's one of the biggest problems, which is the whole idea of tariffs is you provide incentive for people to set up shop, but the tariffs are going to change before the shop gets set up.

And as a result, I'm not sure we're going to get much action out of this.

So then the big question about this $4 trillion is where is this $4 trillion coming from?

For months here in the lead, we've been talking to small business leaders about how the tariffs are affecting them.

Most of them say that they are currently eating the tariffs, but eventually are going to have to pass on the cost to their consumers.

So I wonder, in this projection, who pays this $4 trillion?

Yeah, Jack, I want to come back to something you said in the lead.

You said this windfall for the American budget.

And when you charge people a tax, the government gets revenue.

If Best Buy brings in a washing machine, say from Korea, that washing machine gets shipped to America and it sits in the port in customs, and it can't get out of customs until Best Buy writes a check for the tariff.

So at the first level, Best Buy, an American company, is paying the tariff.

But we economists like to look at it a little harder.

Everything's connected to everything else.

So there are some other things that could happen.

Well, Samsung could decide what they want to do is keep their market share, which means they'd have to cut the price they're selling that washing machine at.

But there's a price index called the import price index, and it measures the price of our imports.

What that means is that Trump's promise that foreign companies would pay this tax turned out to be false.

At the moment, Best Buy is paying the tax.

But probably what's starting to happen, what has started to happen in a few places and will happen more over the next few months, is Best Buy will discover that its costs have gone up and then it's going to jack up the price.

Either way, the cost is being borne by Americans right now by Best Buy and therefore by My401k, which is invested in that.

Later on, they'll jack up the price and it'll be American consumers.

It's a tax on Americans being paid by Americans.

Yeah, just to be clear, when I said windfall, I was saying that's what President Trump, how President Trump is describing this.

So what to do with the $4 trillion coming from the tariffs?

Trump once said he was considering a kind of tariff rebate check for American consumers.

Here's what the Treasury Secretary said about that.

I think at a point we're going to be able to do it, but President Trump and I are laser focused on paying down the debt.

I think he's exactly right, that it would be crazy for there to be a rebate check.

By the way, Jake, do you remember just a few months ago we were being told that there would be so many trillions of dollars saved by Doge, we'd all be getting rebate checks?

And I went all over TV having arguments with people saying, how big would the rebate check be?

And it turns out Doge never saved anything.

In this case, the Republicans just passed a budget.

Their budget took an already existing budget deficit and made it worse.

What this is, is basically 400 billion per year over 10 years.

And basically, they've already spent that.

They've spent that giving tax cuts to rich people.

It means overall, what we've done is we've swapped one set of taxes for another.

It used to be we had high income taxes on rich people.

And to fill the budget hole, we're now putting tariffs on.

And so that means we've shifted taxes from the rich to the working and middle class because all of us buy imported stuff and therefore all of us are paying these tariffs.

Fontana Forney USA is a business that imports high end outdoor pizza ovens directly from the family owned manufacturer in Italy.

The U.S. distributor works in close collaboration with the Fontana family to bring their designs exclusively to North America and CEO Jeremy Landy joins me now.

So your business relies on an imported product that you can only get from Italy.

How have the tariffs changed things for you?

The tariffs have impacted us in a couple of different ways.

The first one is just being able to figure out how to navigate them.

What most people don't understand is there's actually two tariffs on our products.

The first one is just the standard 15 percent EU tariff.

But then we have a second tariff, which is the steel tariff, which is 50 percent of the cost of the steel.

So to give some perspective, in June, I had two ocean containers come in and they were taxed at over 80 percent.

And so we paid our 80 percent tariff on on these ocean containers that came in and later found out that that isn't exactly what the situation is.

Working with our customs brokers, they're not even exactly sure what the procedures are.

So not only does it tie up cash, it's just it's hard to plan.

And it constantly has us rethinking inventory levels.

So it looks as if because the landscape is only always changing that we're not going to have an 80 percent tariff at this point in time.

But honestly, we're not exactly sure where it's going to land.

But yeah, we've we've had to raise prices.

August 1st was our first price increase in in years.

And it's something that we absolutely don't take lightly.

We absorb the cost for as long as we could.

And we've even absorbed some of the cost to not pass it all on to the customer.

But August 1st, we did have a 10 percent increase in prices.

So hopefully we don't have to have another one.

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'Trump's promise that foreign companies would pay. . .turned out to be false': Economist on tariffs

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