The more Trump talks about making trade deals, the more confusing the tariff picture gets

Trump still wants tariffs

As part of any deal, Trump wants to keep some of his tariffs in place. He believes the import taxes can generate massive revenues for a heavily indebted federal government even though other countries see the whole point of striking a deal as getting rid of tariffs.

“They’re a beautiful thing for us,” Trump said recently about tariffs. “If you can use them, if you can get away with using them, it’s going to make us very rich. And we’ll be paying off debt, we’ll be lowering your taxes very substantially because so much money will be taken in that we’ll be able to lower your taxes even beyond the tax cut that you’re going to be getting.”

So far this year, the U.S. government has collected $45.9 billion from tariffs, about $14.5 billion more than last year, according to the Bipartisan Policy Center. Those revenues could escalate sharply given the 10% baseline tariffs, the 145% rate being charged on Chinese goods and rates as high as 25% on steel, aluminum, auto and Mexican and Canadian imports.

To reach Trump’s stated goals of repaying the $36 trillion debt and reducing income taxes, his tariffs would need to raise at least $2 trillion annually without causing the economy to crash in ways that lead to lower overall tax revenues. That would be close to impossible mathematically.

How do negotiations work?

The Republican administration has said 17 of its major 18 trading partners have essentially presented them with term sheets, which list the possible compromises that they are prepared to make. Agreeing to a mutual understanding of the terms would be only the start of any trade talks.

But foreign leaders have said it is unclear exactly what Trump wants or how deals could be codified into a durable agreement. They also know Trump approved the United States-Mexico-Canada Agreement in 2020, only to charge new tariffs on those same two trading partners this year.

While meeting with Trump on Tuesday, Canadian Prime Minister Mark Carney suggested the next version of that agreement would need to be strengthened to prevent a repeat of the fentanyl-related tariffs imposed this year by Trump that Canada saw as arbitrary.

’Some things about it are going to have to change,” Carney said.