Q&A – Tariff Revs & Debt Reduction

Tariff revenue alone holds the potential to nearly cover the entire estimated federal deficit over the next decade resulting from President Trump’s signature legislation, or perhaps could produce surpluses should interest rates come down significantly, lowering the cost burden to service the national debt and/or if the economy grows faster than the CBO’s estimates – as it did following President Trump’s 2017 tax cuts.

Episode Transcript

Speaker 1 (00:03):
Your questions, Brian's answers. It's time for today's Q and
A of the day. This is the Brian Mud Show
and today's QNA Tariff revs and Debt Reduction, brought to
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You may email me Brian Mudd at iHeartMedia dot com,

(00:23):
hand me up on social at Brian Mud Radio. You
may also use the iHeartRadio talkback feature. We'd love it
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You may lay down a message right there, maybe for
a future Q and A. Today's note is this I
just read the tariffs brought into record twenty seven point

(00:47):
seven billion dollars in July. Is it possible that the
debt can be paid down with this income? How would
that work? Does Congress need to vote to do this?
Thank you for remaining in my broadcast reach well, thank
you for continuing to listen, and just reminder you can
always you know, with iHeartRadio you can listen to us
no matter where you are and be anywhere in the world.

(01:09):
And we actually have some Ascia listeners and listeners literally
every continent except for Antarctica have not seen an Arctica
show up yet, but working on it. That's interesting. Don't
think too hard on that one, Joel. It's less interesting
than you might make it. So about tara for revenue,

(01:32):
here's the president.

Speaker 2 (01:33):
Trillions of dollars is coming in from tariffs from all
over the world, from countries that took advantage of our country.
They thought we were children. They took advantage of us
for decades, and now the money is flowing to us.

Speaker 1 (01:48):
We're going to show who the big boys are. And
you have people mocking Trump when he said that trillion.
So well, let's take a look at this in addressing
today's question, and the tariff revs from July did come
in at a monthly record of nearly twenty eight billion
have now topped one hundred and fifty billion dollars for
the year, also a new record through the first seven

(02:11):
months of the year, but of course, the most recent
pace of tariff collections following Bresident Trump's tiered implementation of
Liberation Day tariffs and trade deals has picked up considerably.
For example, July's tariff revenue was twenty billion dollars, or
three hundred and fifty percent higher than July a year ago.
And while many did scoff and how much revenue generation

(02:33):
might take place, they really can't do that anymore. Just
under three percent of the federal government's total revenue this
year is the result of tariffs, a figure that would
be five percent or higher if rates are left at
current levels. In terms of significance, many are taking notice.
Just this week, the independent watchdog, the Committee for a

(02:57):
Responsible Federal Budget released story entitled Tariffs are Generating meaningful
new revenue. A key highlight to the report was this
the new tariffs introduced by the current Trump administration will
generate and estimated one point three trillion dollars of net
new revenue through the end of his term and two

(03:18):
point eight trillion through twenty thirty four before accounting for
economic effects, about six hundred billion dollars more than the
tariffs in effect as of May. And that is hugely
significant because you might recall that the Congressional Budget Office
estimated the costs of the One Big, potentially esthetically pleasing

(03:41):
Act to be three point four trillion dollars over the
same timeframe. Plaus Congress passed a recisions law reducing federal
spending slightly since the OBBBA, and there's also talk of
additional cost saving measures going forward as well. So, in
other words, tariff revenue alone holds the potential to nearly

(04:05):
cover the entire estimated federal deficit over the next decade
resulting from President Trump's signature and legislation, or perhaps could
produce surpluses should interest rates come down significantly that would
lower the costs BERD to service the national debt, and
or the economy grows faster than the CBO estimates, as
it did following President Trump's twenty seventeen tax cuts. So yeah,

(04:29):
Trump is not off base and saying trillions, because it
would be trillions if this is left in place. As
it pertains to today's question about where this money goes.
How all this comes together, start by breaking down quickly
simply how the tariff process works. When a US importer
pays the teriffy ond goods entering the country, the process

(04:51):
is managed by US Customs and Border Protection, so the
tariff is determined by what's called a harmonized tariff schedule.
It's paid by the US importer, not the foreign seller,
but the US importer, and then the CBP collects the tariff.
That's usually done electronically, and the revenue is deposited into

(05:11):
the US Treasury's General Fund. Now, Congress hasn't specified how
much tariff revenue is going to be used and for what,
So right now it just kind of supports all government
spending from social security to defense as previously allocated by Congress.
The Treasury Secretary nor the President retain the unilateral authority

(05:34):
to determine what happens with tariff revenue. So because the
federal government is still running deficits, the impact of the
revenue has had the immediate impact of reducing deficits spending
going forward. If tariffs are left in place, Congress would
account for these additional revenues. Various ideas have been floated,

(05:55):
such as issuing tariff dividend checks to taxpayers to sit
in debt reduction. By the way, I'm firmly in the
debt reduction camp on that side of the issue. And
then the next dynamic of play, aside from continued trade
deals that might evolve the tariff picture, is the outstanding
legal challenge to the president's authority to unilaterally impose tariffs

(06:16):
that is still within the federal court system and obviously
cond factor in significantly based upon what the final rulings
are there. But yeah, that is where we are. That
is the view of the possible more to come.