In the early half of 2018, President Trump cracked down on trade practices by implementing tariffs on countries such as Mexico, Canada and the European Union to fix what he perceived to be a trade imbalance. As part of this initiative, he placed tariffs on imports such as steel and aluminum, eliciting much pushback - both from Americans and those abroad.
Shortly thereafter, in early August, the president defended the tariffs, tweeting that they would help pay off large amounts of the country's debt. However, several experts have chimed in since then, claiming otherwise.
Weighing in with the experts
Before delving into discussion about calculations and the logic behind the president's statement, an article by The Center for Strategic and International Studies points out that first we need to understand the difference between the national debt and federal budget deficits. These two terms are often used interchangeably, but erroneously so because they refer to two very different concepts.
Put simply, the deficit is the negative difference between what the government takes in (typically through taxes) compared to what it spends. When the federal government spends more than it brings in, the country runs what's called a budget deficit.
On the other hand, the national debt refers to money the country has borrowed from different sources but hasn't yet paid back. So, what's the relationship between a deficit and a debt? When the country has a deficit, its debt grows. But say, for instance, it has a surplus, the debt shrinks. In other words, a deficit may affect the debt, but it's not the same thing as the debt.
In reference to the debt, President Trump's tweet appears to claim that the implemented tariffs will chop large chunks off it. But according to an article by MarketWatch, the numbers don't add up. The article suggests that while tariffs do bring in money for the treasury, the amounts received from them aren't anywhere close to being sufficient for paying off the entire $21 trillion debt - at least anytime in the near future.
Using figures provided by the Customs and Border Patrol, the article calculates that the implemented tariffs bring in about $55 million a week. Tally that up for an entire year and the anticipated total comes to approximately $2.86 billion a year, which doesn't make a dent in the trillions of dollars outstanding.
The New York Times weighed in similarly, stating that to pay off the entire debt as it currently stands in 2018, the president would have to place "a more-than 33 percent tariff on $2.34 trillion in imports - which is to say, every single good the United States imported last year."
Something else to bear in mind is that when tariffs are introduced, consumer patterns change. In other words, to avoid the cost of tariffs, people generally find alternative ways to obtain what they need rather than by importing, which causes a decline in how much tariffs bring in over time, throwing another wrench against the president's statement.
How you can make a difference
As young professionals and students, you're affected by the political and fiscal happenings of today just as much as anyone else, if not more. But that doesn't mean you have to sit back and watch. Your actions today can help you secure a stronger financial future for tomorrow.
Up to Us is focused specifically on helping students take action to achieve a fiscally sound future for themselves and our nation.
The program aims to help students run successful campaigns and events to increase awareness on campuses about fiscal issues and policies that can negatively impact your future. Learn more about Up to Us and how you can make a difference by visiting www.itsuptous.org.