00:00This is how much money the U.S. was making from tariffs when President Trump took office
00:04for the second time.
00:05And this is how much the country is making now.
00:09You know, we're finding hundreds of billions of dollars of cash is pouring into our country
00:13now.
00:14He's right.
00:15The U.S. is making quite a bit of money, just not nearly enough to pay for some of
00:20Trump's ambitious goals.
00:22Most of the tariff revenue are going to be paid by importers.
00:25It's simply a question then, how much of that do they pass on to consumers?
00:30So how does the U.S. collect the billions it rakes in through tariffs?
00:34And what does it do with all of that money?
00:37First let's take a look at how much the country is making.
00:40According to the Penn-Wharton budget model, the U.S. has collected more than $159 billion
00:45in tariff revenue as of early September.
00:48That's a 148% increase compared to a year ago and $642 million per day from tariffs.
00:55While Trump has claimed the U.S. has made trillions through tariffs, that's not totally
00:59accurate.
01:00Yet.
01:01That gap will continue to grow throughout the rest of the year.
01:04We're ultimately projecting, starting next year and for the next 10 years, that the government
01:11will collect about $2.9 trillion in revenue, but of course those could change.
01:17That's because Trump's tariffs are still under negotiation.
01:20And that's made predicting future demand difficult for U.S. importers.
01:24And less demand could eventually mean less tariff revenue.
01:27We've seen pretty wild swings in import volumes at U.S. seaports this year.
01:32Ground zero for that has been Southern California.
01:36That's where you have this twin port complex, the port of Los Angeles and the port of Long
01:41Beach.
01:42Take China for example.
01:43When the Trump administration raised tariffs on Chinese goods to 145% in April, imports at
01:48the port of Los Angeles plunged.
01:50For May, there were about 655,000 containers handled at the port complex that month, which
01:57sounds like a lot, but was actually the lowest cargo volumes for about two years.
02:02When the U.S. reduced those tariffs to 30% in May, while negotiations played out.
02:06We saw another flood of cargo into the port complex such that in July, the port complex broke a record
02:13and handled more than a million boxes in a single month.
02:16Now let's take a second to discuss how these tariffs are collected.
02:19Say a container worth of goods is exported from another country.
02:23Before it's sent to the U.S., the importer files paperwork with the U.S. Customs and Border
02:27Protection with details about what's coming.
02:30Once that shipment arrives, CBP reviews the paperwork before clearing the goods for release and records
02:36exactly when the cargo hit U.S. soil.
02:39The imports will then often move to a warehouse for storage.
02:42And at that point, it's the importer who has 10 to 30 days to pay the tariff.
02:46In those cases where importers have been having to pay higher tariff rates to bring goods into
02:52the country, we've seen a whole slew of actions that they've taken from talking to their suppliers
02:58about trying to drive down the rates of the goods that they've bought, asking suppliers to
03:03share in maybe a small percentage of the increased tariff rate.
03:07And in some cases, they're also raising prices in ways that maybe consumers wouldn't even
03:11notice.
03:12So, for example, raising the threshold for free shipping or maybe getting rid of free shipping
03:17altogether.
03:18Once a tariff is collected, CBP sends that money to what's called the U.S.
03:22Treasury's General Fund or America's Checkbook.
03:25At that point, it's up to Congress to appropriate that money where it sees fit.
03:30Going forward, especially starting next year, if the current tariff rates stick around, it
03:36will raise a fair amount of revenue.
03:38And of course, ultimately, that revenue is coming from U.S. households and U.S. firms who
03:43are essentially paying that money.
03:46Trump has floated a number of ways to spend that cash, including potential rebate checks
03:50for some Americans or replacing the federal income tax.
03:53There's one big ticket item, though, that looms large.
03:56Primarily, we want to pay down debt.
03:59Still, if you compare tariff revenues against the country's growing deficit, it only makes
04:03up a small fraction.
04:05A White House spokesperson told the Journal that the tariff revenue will, quote, amount
04:10to trillions of dollars in the coming years.
04:12This is really the first time that tariffs are being used as a revenue generator for the
04:19U.S. Treasury.
04:20And the motivation behind that is that we're on this exploding debt path right now.
04:25It's unsustainable.
04:27And so there has to be some revenue that comes in or some spending that goes down in order
04:32to try to stabilize the future debt to output ratio in the U.S. economy.
04:39Whether Trump has the ability to impose global tariffs remains an open question.
04:43A federal appeals court in August struck down Trump's tariffs, ruling that he overstepped
04:47his authority when using his emergency powers to rewrite trade policy.
04:53Trump called that ruling highly partisan, and the Supreme Court agreed to hear his appeal.
04:57Tariffs are often challenging to take back once they're implemented because a lot of
05:02the domestic firms have organized around those tariffs, and in particular, they've made investments,
05:10they've increased prices, they've done other things to take advantage of those trade barriers.
05:16I know that there are importers out there who are waiting to see whether the court finds
05:21that the president didn't have the power to implement them.
05:24Then they're waiting on the sidelines perhaps to apply for refunds for some of the tariffs
05:28that they've already paid.
