In an ideal world that believes in free trade, countries would import and export goods and services without tariffs. Of course, this utopian world exists only in economic textbooks. In the real world, countries impose tariffs for various reasons – to protect domestic industries, as leverage in trade negotiations, to safeguard national security, etc.
During his first term, Trump imposed tariffs on many countries – primarily Mexico and China – that he thought played unfairly on world commerce platforms. For nearly 35 years, going back to his appearances on Oprah Winfrey and Phil Donohue, Trump has been consistent in saying that other countries take advantage of American trade policies that do not impose tariffs on imported goods. Still, these same countries levy hefty tariffs on goods that the U.S. exports.
At the Philadelphia debate with Vice President Kamala Harris, Trump said: “Other countries are going to finally, after 75 years, pay us back for all that we’ve done for the world, and the tariff will be substantial.” His proposed across-the-board 10% tariff would raise “hundreds of billions of dollars.”
Harris responded that tariffs are effectively a “sales tax” on American households. However, her charge was weak and hypocritical because the Biden-Harris administration has continued the Trump tariffs on China to this day. Recently, President Biden announced that he would levy a 100% tax on Chinese electric vehicles.
In recent days, the Trump campaign has become more specific about its tariff plans. Howard Lutnick, the head of Donald Trump’s Transition and Policy team, appeared earlier this week on CNBC and said that if elected in November, Trump would follow a simple rule: “We should put tariffs on stuff we make and not put tariffs on stuff we don’t make.” Trump was even more specific. Speaking this week at a town hall in Flint, he outlined how his administration would impose tariffs to level the playing field. If a country imposes a 20% tariff on American exports, he would levy the same 20% tariff on that country’s goods coming into the United States.
Do tariffs increase government revenue? Or do consumers bear the brunt of the tariffs?
When levied intelligently, tariffs can be a significant source of additional revenue for government coffers without impacting the consumer. To prove this point, let us examine a routine purchase that many American families make.
Suppose an American consumer wants to buy an LED gooseneck table lamp. For a popular brand, we found the price on Amazon to be $15.78. This product, like millions of other consumer goods, is made in China, which dominates global manufacturing of low-end items.
The same product, from the same Chinese manufacturer, retails in India on the Amazon India website for INR 389, which is about $4.65.
How can the same product have a 337% markup when sold in America compared to India? Is the Chinese company losing money on their India sales?
Not at all. China is truly the world’s megafactory. Because of very cheap labor and a state-of-the-art supply chain, it has developed enormous economies of scale, allowing it to make products at remarkably low costs. Even when selling the lamp to Indian consumers at $4.65, the company makes a tidy profit. It is just that the profit is 337% higher when selling to an American, minus, of course, any additional shipping and handling costs. The American GDP per capita, at $82,000, is among the highest in the world. So, the Chinese company prices its products to the American market at a level the company knows the consumer would pay.
Suppose Trump were to impose a 10% tariff on this lamp. If Kamala Harris is correct, the Amazon price would increase by 10% to $17.36. The consumer would be paying for the tariff, which would indeed be an indirect sales tax. But this kind of analysis is for economic textbooks.
In real life, another economic concept called “market share” kicks in. The Chinese company would hate to lose customers because of the 10% price increase, as presumably, some consumers would shop around and buy a different brand from another manufacturer that is priced lower, even after accounting for the 10% tariff. So, the Chinese company would absorb the tariff and price it at $14.34 on Amazon so that the total cost to the consumer would still be $15.78 as before. However, the $1.34 tariff, paid by the consumer at checkout, would directly go to the United States Treasury.
America is $35 trillion in debt, with the government’s annual interest payments alone exceeding $1 trillion, more than the Pentagon’s budget. Whether it is Harris’s tax-borrow-spend policy or Trump’s tax-cut policies, no politician in recent memory has been responsible enough to balance our budget. The last time the U.S. federal budget was balanced was in fiscal year 2001. That year, the government recorded a surplus, meaning revenues exceeded expenditures. Since then, the budget has typically run a deficit.
An entire generation of Americans is now used to consuming government services but not adequately paying for them in taxes. The most significant U.S. federal budget deficit in the last twenty years occurred in 2021 ($2.8 trillion) when Biden-Harris recklessly borrowed and spent on stimulus measures and economic relief programs that drove up inflation. In 2022, the deficit was $1.4 trillion, and in 2023, it was $1.7 trillion. This trajectory is not sustainable.
America imports about $3 trillion in goods and services annually. A 10%across-the-board tariff should generate $300 billion without hurting the consumer, a valuable injection of funds to the Treasury. Even if such a broad tariff doesn’t pass Congressional muster, and even if tariffs generate just a third, we are talking about $100 billion in additional cash for the United States government.
President Trump wrote “The Art of the Deal” in 1987. If he can leverage his deal-making skills, with his tariffs and stress on no wars, he could starve the Military Industrial Complex, lower budget deficits, and re-make the international order forever. It is little wonder that he continues to be a target for a gunman’s rifle.
Rajkamal Rao is a columnist and a member of the tippinsights editorial board. He is an American entrepreneur and wrote the WorldView column for the Hindu BusinessLine, India’s second-largest financial newspaper, on the economy, politics, immigration, foreign affairs, and sports.
TIPP Takes
Geopolitics, Geoeconomics, And More
1. State Of The Race: RealClearPolitics Average
Of the seven battleground states, Trump leads in Arizona, North Carolina, and Georgia, while Harris leads in Michigan, Wisconsin, Pennsylvania, and Nevada.

A new American Greatness/TIPP Poll in Georgia released on Thursday showed that Trump and Harris tied at 48% among likely voters. The race is much tighter than it was in 2020, and Trump typically outperforms polls in states like Wisconsin and Michigan, making it even closer.
2. Israel Unleashes Heavy Strikes On South Lebanon – Reuters
In Thursday’s late operation, Israel launched dozens of bombs across southern Lebanon, three Lebanese security sources said. There were no immediate reports of casualties.

Israeli radio stations reported that dozens of fighter jets struck Hezbollah targets, including around 100 rocket launchers. Israel’s military did not confirm the shelling but said earlier it had struck dozens of Hezbollah targets, including rocket launchers and weapon depots in southern Lebanon.
3. Pentagon Says No U.S. Support For Israeli Offensive Operations As Lebanon Tensions Rise – Al Arabiya
The U.S. defense secretary spoke to his Israeli counterpart four times this week, a sign of how concerned the Biden administration is about an escalatory pattern along the Lebanon-Israel border.

The U.S. believes a land invasion or Israeli attempts to create a so-called “buffer zone” inside of Lebanon will not result in the return of Israeli residents to the north, something which the Israeli government has said is a new goal of theirs.
4. Gaza Ceasefire Deal Unlikely Before Biden’s Term Ends: Report – Reuters
U.S. officials now believe that a Gaza ceasefire deal between Israel and Palestinian group Hamas is unlikely before President Joe Biden leaves office in January, the Wall Street Journal reported citing top-level officials in the White House, State Department and Pentagon without naming them.

“I can tell you that we do not believe that deal is falling apart,” Pentagon spokesperson Sabrina Singh told reporters on Thursday before the report was published. U.S. Secretary of State Antony Blinken said two weeks ago that 90 percent of a ceasefire deal had been agreed upon.
5. Iran Flies Ambassador, 95 Patients Out Of Lebanon After Explosions – dpa
Iranian Foreign Minister Abbas Araqchi visited the injured diplomat, Mojtaba Amani, at a hospital in Tehran. State media initially reported that Amani suffered a “slight injury” after hundreds of pagers exploded on September 17.

Israel has not publicly admitted responsibility, but the country is widely assumed to be behind the coordinated blasts.
6. Iran Warns Israel Of ‘Crushing Response’ To Lebanon Device Blasts – Al Arabiya
Israel has not commented on the attacks that killed 37 people and wounded nearly 3,000 over two days but has said it will widen the scope of its war in Gaza to include the Lebanon front.

In April, Iran fired hundreds of missiles and drones at Israel after it bombed the Iranian consulate in Damascus, killing seven IRGC members, two of them generals.
7. Biden, Harris To Meet Zelenskiy At White House Next Week – RFE/RL
The White House said President Joe Biden and Vice President Kamala Harris will hold separate meetings with Ukrainian President Volodymyr Zelenskiy on September 26.

The Ukrainian presidency announced separately that Zelenskiy also will meet former U.S. President Donald Trump, the Republican party’s presidential nominee.
8. U.S. Hits Network Allegedly Facilitating Russia-North Korea Sanctions Evasion – RFE/RL
The Treasury Department said the United States has imposed sanctions on a network of five entities and one individual for allegedly enabling payments between Russia and North Korea.

The entities and the individual Ossetia are accused of ” supporting ongoing efforts to establish illicit payment mechanisms” between Russia and North Korea.
9. Outgoing NATO Chief Says Members Must Be ‘Willing To Pay The Price’ Of Peace – RFE/RL
In his farewell after leading NATO for a decade, Jens Stoltenberg warned against “isolationism” among NATO’s 32 members, saying they must be “willing to pay the price for peace” in the face of an emboldened Russia.

“We have to be willing to pay the price for peace. The more money, the stronger our defenses, the more effective our deterrence, the greater our security,” he said. Any future peace deal between Ukraine and Russia, he said, “must be backed by strong and sustained military support, not just pieces of paper.”
10. China Spent Millions On This New Trade Route – Then A War Got In The Way – BBC
The intractable civil war in Myanmar, triggered by a bloody coup in 2021, is becoming costly for China, which has invested millions of dollars in Myanmar for a critical trade corridor.

The ambitious plan aimed to connect China’s landlocked southwest to the Indian Ocean via Myanmar. But the corridor has now become a battleground between Myanmar rebels and the country’s military regime.
11. Satellite Photos Show Expansion Of Suspected North Korean Uranium Enrichment Site – RFA
Satellite imagery has revealed that a suspected North Korean uranium enrichment facility that leader Kim Jong Un may have recently toured has grown significantly since construction was first spotted there in February.

The Kangson facility, just outside of the capital Pyongyang, is being monitored by the International Atomic Energy Agency, or IAEA, for possible production of enriched uranium, which can be used for nuclear power generation – but is also a vital ingredient for an atomic bomb.
12. Japan Overtakes EU, U.S. As Global Climate Leader For ASEAN, Survey Shows – Nikkei Asia
A Singapore-based think tank found Southeast Asians are more likely to identify Japan as an international climate leader than the European Union and the U.S.

The ISEAS-Yusof Ishak Institute’s annual Southeast Asia Climate Outlook Survey asked 2,931 Southeast Asians to choose from among eight countries and regions the one that has most demonstrated leadership in helping the world meet the goals of the Paris Agreement.
13. EU Parliament Recognizes Maduro Rival As Venezuela President – D.W.
The European Parliament passed a resolution recognizing opposition figure Edmundo Gonzalez Urrutia as Venezuela’s legitimate president after incumbent Nicolas Maduro claimed victory in the disputed vote.

The vote is non-binding and does not reflect the stance of individual EU member states. The Venezuelan parliament condemned the resolution in a statement, saying it “categorically rejected the sinister aggression prompted by the fascist right of the European Parliament.”
14. Breastfeeding Supports Healthy Infant Microbiome, Lowering Asthma Risk – HealthDay News
Breastfeeding through the first year of infants’ lives can lower their risk of asthma by colonizing their bodies with a healthy mix of microbes, a new study finds.

Researchers reported in the journal Cell that breastfeeding beyond three months supported the gradual maturation of a baby’s gut microbiome. On the other hand, baby formula contains nutrients that promote the growth of a different set of microbes. While many microbes that thrive on formula eventually develop in all babies, their early arrival is linked to an increased risk of asthma.
15. New Data Supports Animal Market Origins Of COVID-19 Pandemic – HealthDay News
The Hunan Seafood Wholesale wet market in Wuhan, China, has long been considered the most likely source of the coronavirus that caused the COVID-19 pandemic.

That theory is now supported by a new study analyzing more than 800 samples collected in and around the market in January 2020 as the pandemic began. According to results published in the Cell, those samples show that animal species known to carry the COVID coronavirus were present in the market.
Republished with permission from TIPP Insights