The Flimsiness of Trumponomics
7 min read
This is an edition of The Atlantic Daily, a newsletter that guides you through the biggest stories of the day, helps you discover new ideas, and recommends the best in culture. Sign up for it here.
Donald Trump’s reported idea to replace the income tax with huge tariffs on imports exposes the hollowness of his populism.
First, here are three new stories from The Atlantic:
- The 1970s movie that explains 2020s America
- Trump dreams of a swifter death penalty.
- The schools that are no longer teaching kids to read books
Fabulist Math
Economists are warning that Trump’s reported idea to eliminate the income tax and replace it with massive tariffs on imports would cripple the economy, explode the cost of living, and likely set off a trade war. And because the math doesn’t come close to working, it would also tremendously increase the national debt.
In other words, Trump’s latest notion is both economically and fiscally illiterate. “If a 20yo interviewing for a House internship suggested replacing the income tax with a massive tariff, they’d be laughed out of the interview,” Brian Riedl, a conservative budget expert, wrote on X.
The politics of Trump’s latest scheme are perhaps even worse, because this plan exposes the hypocrisy of his faux populism. Indeed, what’s striking about the idea is just how regressive and non-populist it is. Replacing the income tax with tariffs would result in massive tax cuts for the ultrarich—at the expense of middle and lower-class Americans. Brendan Duke and Ryan Mulholland of the left-leaning Center for American Progress estimate that Trump’s proposal would raise taxes by $8,300 for the middle 20 percent of households, if American consumers end up bearing the full brunt of tariffs on imports.
Working Americans would be hit first by the higher tariffs and then by the inevitable economic fallout as businesses that rely on imports are crushed. Those same workers would also see the downstream effects of the inevitable retaliation from America’s former trading partners, which would likely result in a global trade war.
Even a more modest version of Trumponomics—imposing a 10 percent tax on all imports and a 60 percent tax on all imports from China, without trying to replace the income tax altogether—could result in a $2,500 annual tax increase for the typical family. Duke and Mulholland estimate that this plan would slap a $260 tax on the typical family’s electronics purchases, an $160 tax on its clothing purchases, and a $120 tax on its pharmaceutical-drug purchases. Middle-class families would pay more for gas and oil, along with toys and food. That’s because, as any economist will tell you, a large portion of increased tariffs are ultimately paid by consumers, not by the companies importing the goods. Republicans used to understand this concept, but now they seem desperate to deny it: Anna Kelly, a Republican National Committee spokesperson, recently insisted, “The notion that tariffs are a tax on U.S. consumers is a lie pushed by outsourcers and the Chinese Communist Party.” This is economic bunkum.
But then, so is Trump’s whole bizarre scheme, which relies on fabulist math. Abolishing income taxes would create a multitrillion-dollar hole in the federal budget. As The Washington Post’s Catherine Rampell points out, “The entire value of all the goods we import each year is itself about $3 trillion. Not the tariffs, mind you, but the goods themselves.” In order to make up for the lost income-tax revenue, Trump would have to impose a tax of 100 percent on the value of everything we import. In other words, the cost of everything we import from abroad would more than double.
In the real world, this huge new tax would suppress demand for imports, which would in turn drive down the revenue from the Trump tariffs. The result: massive deficits as revenue falls short, even-higher taxes on the remaining imports, and draconian cuts in spending, including the entitlement programs, such as Social Security and Medicare, that Trump has promised (if somewhat inconsistently) to protect.
And then there is the Ghost of Smoot-Hawley. Historians and economists regard the 1930 Smoot-Hawley Tariff Act—which dramatically boosted tariffs on imports—as a disastrous miscalculation that deepened the Great Depression. Trump’s tariff tax is Smoot-Hawley with its hair on fire.
All of this might explain the skepticism of the otherwise friendly CEOs who talked to Trump at a recent meeting of the Business Roundtable. “Trump doesn’t know what he’s talking about,” one CEO reportedly said; the CEO reportedly added that Trump failed to explain how he planned to implement his policies. Some of the executives apparently seemed surprised by the realization that the former president’s economic ideas were nonsense.
Maybe they should start paying closer attention. But so should Trump’s base. Despite Trump’s insistence that he is the tribune of the forgotten common man, the former president’s economic incoherence could prove devastating to the very voters he claims to champion.
Related:
- Trump’s plan to supercharge inflation
- Why Wall Street won’t stop Trump
Today’s News
- The Supreme Court upheld a Trump-era tax on foreign income that helped fund tax cuts imposed by the federal government in 2017.
- Russian President Vladimir Putin and North Korean leader Kim Jung Un signed a treaty yesterday that revived a Cold War–era mutual-defense pact calling for immediate military intervention when either country is attacked, according to a text of the treaty published by North Korean state media.
- Robert F. Kennedy Jr. failed to qualify for the presidential debate that will be hosted by CNN on June 27.
Dispatches
- Work in Progress: English-speaking teens might be exporting their anxiety abroad, Derek Thompson writes.
- Time-Travel Thursdays: Emma Sarappo revisits early reviews of classic books and discovers which books The Atlantic loved—and hated.
Explore all of our newsletters here.
Evening Read
Has the DEI Backlash Come for Publishing?
By Dan Sinykin and Richard Jean So
In July 2020, Lisa Lucas was hired as the publisher of Pantheon and Schocken Books, prestigious imprints of Penguin Random House. She was the first person of color to hold the post. Black Lives Matter was resurgent after the murder of George Floyd. Demand for books by Black authors had spiked … Publishers, compelled to act, released statements, hired more diverse staff, and acquired books by writers of color. Two years later, Lucas anchored a feature essay in TheNew York Times about the changes in the industry. Maya Mavjee, Lucas’s boss, was quoted as saying, “It’s extraordinary how much she’s managed to achieve in such a short time.” But on May 20, 2024, Lucas was let go.
Read the full article.
More From The Atlantic
- We ruined rain.
- Ilhan Omar: Open the door wider for refugees.
- An Emersonian guide to taking control of your life
- Americans with food allergies are getting a bad deal.
Culture Break
Listen. In Radio Atlantic’s new episode, Amanda Mull explains the airport-lounge arms race and why the fanciest places in air travel keep getting fancier.
Watch. The Pulitzer Prize–winning playwright Annie Baker makes a great cinematic leap with her debut film, Janet Planet (out tomorrow in theaters).
Play our daily crossword.
Your Thoughts
This newsletter has a curious and thoughtful community of readers. In a previous edition, we asked readers to share how they’re thinking about the 2024 election. Here’s what some shared when asked if they discussed the election with their loved ones. Their responses may have been edited for length and clarity.
- “I rarely, if ever, talk politics with any of my family or friends. It’s impossible to counter emotion (strong emotion now) with rationality. I keep myself quite well informed, and I am confident in my choice. What would be the point of a discussion? Will I change someone’s mind? No. Will they change my mind? No.” –– Andrea Williams, New Hampshire
- “I am an American living abroad in the Netherlands, married to a Norwegian. The great plus of living abroad is having the opportunity (if you mingle outside the expat bubble) to see your country from an entirely new vantage point. We have two sons, one almost 18 and one 21. As dual citizens, I believe it is important for them to exercise their right to vote. Believe me, every single European wishes they could vote for the next U.S. president because the outcome doesn’t only affect Americans but people around the world. This rings especially true when wars feel so close to our doorstep. So yes, we discuss things, but not in great detail. I do not want to push my ideas on them; they need to figure that out for themselves.” –– Anonymous
- “My wife and I talk a great deal about the election with each other and our adult son and daughter. We also talk with family and friends. However we have family members and friends who, over the course of time, we’ve learned that to preserve these relationships, we no longer talk about politics. In fact within the larger family, we’ve all taken the position that family is the most important thing in life, and so we put politics aside. With those with whom we do talk, it is to keep each other informed. But I think to a larger degree, because we’re all frightened by what will happen should Trump win, we talk and use humor to try and ease our anxiety in the short run.” –– Anthony D’Agostino, New Hampshire
- “We discuss politics and policy issues with both friends and family. The biggest surprise is the political avoidance of our otherwise brilliant, and well-off, 50-plus-year-old kids. The generational gap is surprising. Many of my friends and I try to support sensible candidates, but our kids mostly avoid politics.” –– Richard Carlson, 82, Tucson, Arizona, and Lake Tahoe
We have loved hearing from you all, and look forward to learning about more of your perspectives in the future. Thank you for joining the conversation with us!
Stephanie Bai contributed to this newsletter.
When you buy a book using a link in this newsletter, we receive a commission. Thank you for supporting The Atlantic.
