Lutnick: “We’re going to make the External Revenue Service replace the Internal Revenue Service.”

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Budget Outlook from the CBO.

By “External Revenue Service” Commerce Secretary Howard Lutnick means tariffs.

Click on the above link for a video cheered on by Fox News, watched 317,000 times, and liked by 686 fools.

To balance the budget with tariffs, the administration would need to bring in $7 trillion. To replace individual and corporate income taxes, tariffs would need to bring in $3.1 trillion.

Tariffs brought in about $30 billion for the full year in 2024.

Annual Goods and Services Balance of Trade

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Annual balance of trade data from Census Department, chart by Mish

Reciprocal Tariffs

We have an annual trade deficit of $918 billion.

Listen carefully.

Team Trump proposes $918 billion in “reciprocal tariffs” to make the trade deficit go away. Team Trump also proposes collecting $7 trillion in tariffs to balance the budget and get rid of the IRS.

I would love to hear a detailed explanation of exactly how that works.

Since it doesn’t, let’s make some adjustments.

New Assumptions Needed

Tariffs will not be reciprocal. Instead they will be extremely unbalanced, nations won’t react, and there will be no tariff avoidance.

Everyone will gladly pay (meaning consumers). Lutnick and Trump fail to understand tariffs are a tax on consumers.

Annual trade data from Census Department, imports and exports, chart by Mish

Under our new assumptions, Team Trump only needs to bring in $7 trillion in tariffs on $3.3 trillion in total imports.

That’s much easier than bringing in $7 trillion in tariffs $918 billion reciprocal tariffs.

We need to faithfully collect 200 percent tariffs on everything with of no trade frictions, no retaliations, and full compliance.

Are you ready for that miracle? Me too. But wait, there are still more benefits to this amazing deal.

Trumps Claims

1. Tariffs will increase revenue enough to balance the budget
2. Tariffs will bring manufacturing back to the US
3. Tariffs will reduce inflation
4. Tariffs will increase exports

Conflicting Economic Madness

Points 1 and 2 conflict. Tariffs cannot simultaneously bring back manufacturing and raise enough revenue to balance the budget.

Points 2 and 3 conflict. Since the US is the world’s highest cost producer of goods thanks to unions, tariffs will not reduce inflation.

Points 2 and 4 conflict. Since the US is the world’s highest cost producer of goods and other countries will retaliate, tariffs will not increase exports.

Tut Tut to the Skeptics

Some of you may be skeptical, but I am a true convert.

With Trump, there cannot be contradictions. It’s the same as asking an all-powerful God to create a rock so big he cannot lift it.

We resolve the dilemma by stating contradictions and Trump are illogical in nature and cannot exist.

Thus, we can have our cake, eat it too, and gather 20 baskets of leftovers to feed the poor.

Wait What?

Sorry, I just woke up. Wow, what a dream.

I was somewhere in Trumperland with Trump as the Red Queen giving me a lecture on believing impossible things.

Trump and Secretary of Treasury Bessent Discuss the “Detox Recession”

On March 10, I noted Trump and Secretary of Treasury Bessent Discuss the “Detox Recession”

Don’t worry, it’s just a little more pain and inflation disturbance before tariff greatness begins.

Economy Could Be ‘Starting to Roll a Little Bit’

On Squawk Box, Treasury Secretary Bessent said the Economy Could Be ‘Starting to Roll a Little Bit’

And Trump Declines to Rule Out Recession.

Lutnick vs Trump

“There’s going to be no recession in America,” Commerce Secretary Howard Lutnick said on Meet the Press on NBC News.

Somehow Trump and Bessent did not get the message from Lutnick.

I’m not sure how that happened, but I expect that to be quickly fixed now that Lutnick is calling the shots.

The Wall Street Journal had this interesting observation.

Commerce Secretary Howard Lutnick said over the weekend that the President’s tariffs would make some foreign products more expensive but “American products will get cheaper.” Huh? Companies that use foreign components will have to raise prices or swallow narrower profit margins. Does Mr. Lutnick understand, well, commerce?

Cheese Was a “Key Achievement” of Trump’s USMCA Trade Agreement

Meanwhile, please note that Cheese Was a “Key Achievement” of Trump’s USMCA Trade Agreement

If you are struggling with how that can possibly be, please please go to Trumperland where contradictions have no meaning.

“Trumperland Is a Safe Place,” much like academia only much better and much safer, void of contradictions as long as it is Trump who is making them.

Any questions?

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