Trump’s Tariffs Raised Revenue, Not the Factory Jobs He Promised

In January 2014, Kent International announced a $4.3 million bicycle factory in South Carolina that was expected to bring 175 jobs,^[1] and its chief executive, Arnold Kamler, said Walmart had committed to buying the bikes under its Buy America initiative. The plant opened that October in Manning.^[2] In May, Kent told the state it would lay off 64 workers at the plant^[3] because of its “permanent closure.” Kamler, now Kent’s chairman, cited a variety of reasons, and he has said that high tariffs on the Chinese frames and components the plant used left no way to assemble the bikes at a profit in the United States. Tariffs sold as protection for American factory jobs taxed the parts this factory was built to assemble.

Eight months after the president declared April 2 “liberation day”^[4] and promised that “jobs and factories will come roaring back into our country,” the result fits neither side’s story. The next day, JPMorgan economists warned that “these policies, if sustained,”^[5] would likely push the U.S. economy into recession this year, and they put the average tariff rate at about 24%. The condition did not hold. By the Budget Lab at Yale’s^[6] measure, the rate peaked at about 28% in April, and the tariffs in force in mid-November imply 16.8%, or 14.4% once buyers shift to goods with lower tariffs, against 2.4% in 2024. Both are the highest rates since the 1930s. The latest figures show a slowdown, not a recession: real GDP grew at about a 1.6% annual rate^[7] in the first half, the latest period published, against 2.4% over the four quarters of 2024. The factory revival has not arrived either. What has arrived is a large tax, and American shoppers pay a growing share of it.

U.S. duties as a share of goods imports, 1790 to 2025

At the Supreme Court’s argument on November 5,^[9] Solicitor General D. John Sauer said the tariffs’ burden is “actually a mix” of Americans and foreign producers, and Chief Justice John Roberts asked, “Well, who pays the tariffs?” For the 2018 tariffs, the answer was Americans: Mary Amiti, Stephen Redding and David Weinstein^[10] found complete pass-through into the domestic prices of imported goods, so the full incidence fell on American consumers and importers. This round’s evidence is thinner. Matching daily retail prices to product-level tariffs, Alberto Cavallo, Paola Llamas and Franco Vazquez^[11] found in a November working paper that costs were reaching shoppers “gradually but steadily”: six months in, a 20% tariff had raised an affected import’s price by roughly 4% relative to unaffected products in the same sector. Import prices, which the Bureau of Labor Statistics measures without tariffs,^[12] rose 0.8% outside fuel^[13] in the year to September, though prices of imports from China fell 2.6%. That index cannot show what foreign sellers would have charged without the tariffs, but it shows no broad price cut. My inference is that for now most of what shoppers are not paying sits with American importers and retailers. In May, Walmart’s chief financial officer, John David Rainey, told CNBC,^[14] “We have not seen price increases at this magnitude,” and the president replied that Walmart and China should “EAT THE TARIFFS.” If shoppers end up paying all of it, as the Budget Lab assumes, this year’s tariffs raise the price level by 1.2% in the short run,^[6] an average household loss of about $1,700.

Factory workers, the promised beneficiaries, are losing jobs. Since March, the month before the April tariffs, manufacturing employment has fallen by 58,000^[15] through September, the latest month published, and it shrank in each of the last five of those months. The Institute for Supply Management^[16] reported that factory activity contracted in November for the ninth consecutive month, and a transportation-equipment maker told the survey that the tariff environment was pushing it to cut staff and to develop “additional offshore manufacturing that would have otherwise been for U.S. export.” In the 2018 and 2019 round, Federal Reserve Board economists Aaron Flaaen and Justin Pierce^[17] found that manufacturing industries more exposed to the tariffs lost jobs relative to others, because rising input costs and foreign retaliation outweighed the gain from protection. Kent’s frames were an input.

The case for the tariffs is a case about time. In the Rose Garden on April 2,^[4] the president said, “If you want your tariff rate to be zero, then you build your product right here in America.” Brian Pannebecker, the founder of Auto Workers for Trump, told the same audience that the policies would “bring product back into those underutilized plants,” with new investment and new plants to follow. “In 6 months or a year, we’re going to begin to see the benefits,” he said, adding that he could not wait to see “what’s happening 3 or 4 years down the road.” Meanwhile the duties bring in about $30 billion a month,^[18] money the president said that day would “reduce our taxes and pay down our national debt.” Tariffs have worked as leverage, too. In July, Trump tied trade agreements with Thailand and Cambodia to an end to their border fighting,^[19] and in October he brokered a peace agreement^[20] between them. It broke down on December 8, but economic pressure used in place of force is worth something. On December 12, Trump told^[21] The Wall Street Journal that the money pouring into the country was “building things right now,” car plants among them, and that “it may take people a while to figure all these things out.”

Time is the right test, and Pannebecker set a fair clock. The quick gain, product returning to underused plants, would show up first in output and hiring. In September, factory output^[22] stood 0.4% above its March level, and factory payrolls were 58,000 smaller. The slower gain, new plants, would show up first in construction. Spending on manufacturing construction^[23] fell in every month from February to August, the latest published, to 8.2% below its level a year earlier in current dollars. Part of that is an earlier boom cooling, since annual spending nearly tripled from 2021 to 2024, but the decline has continued since April. Announcements are not plants, and plants take years to build. The published data reach only the start of Pannebecker’s window, and they point the wrong way. The long run has its own bill: in the Budget Lab’s model, manufacturing output does rise 2.9%,^[6] but the gain is “more than crowded out” by losses in construction, down 4.1%, and agriculture, down 1.4%, and the economy stays 0.3% smaller.

Revenue is the administration’s strongest number, and it sits on the weakest legal ground. In November, customs duties reached $30.8 billion^[18] net of refunds, and October and November together brought in $62.1 billion, 4.4 times the same two months of 2024. The country-by-country tariffs and the tariffs on Canada, China and Mexico over opioid trafficking rest on the International Emergency Economic Powers Act. The Court of International Trade ruled in May that the law does not authorize them, the Federal Circuit affirmed by a 7-4 vote on August 29,^[24] and the duties kept flowing through the appeal. At the November 5 argument,^[9] Roberts noted that the tariffs work by taxing Americans, “and that has always been the core power of Congress.” The court has not ruled.^[25] If it strikes the emergency tariffs down and they are refunded and not replaced under other laws, the Budget Lab estimates^[6] that the roughly $2.7 trillion this year’s tariffs are projected to raise from 2026 to 2035 falls by about half.

Monthly U.S. net customs duties, January 2024 to November 2025

If the court rules against the tariffs, the importers who paid them should get their money back. Costco sued in the Court of International Trade on November 28,^[27] saying importers are “not guaranteed a refund” without a judgment of their own. The complaint says its entries begin to be liquidated, or finally assessed, as early as December 15, and that Customs and Border Protection denied its request to extend liquidation. Dozens of other companies^[28] have filed similar suits. At the argument, Justice Amy Coney Barrett asked the challengers’ lawyer, Neal Katyal, how reimbursement would work: “Would it be a complete mess?”^[9] It might be, and the government chose that risk when it reached for an emergency statute instead of asking Congress for a tax. Difficulty is no reason to keep money that should never have been collected. If Congress wants tariffs at these rates, it can vote for them.

Tariffs have also built the kind of bureaucracy the administration says it wants to shrink. In January the president ordered that for each new regulation, at least 10 prior regulations be identified for elimination.^[29] His tariffs now depend on country, product, trade deal and annex, and they change by executive order. The November 14 order^[30] exempted beef, coffee, bananas and other foods^[31] from the country-by-country tariffs after weighing “current domestic demand for certain products, and current domestic capacity to produce certain products.” That is a planner’s sentence. Bananas were an easy call. Bicycle frames are harder, and the assemblers who buy them are the ones betting their own capital on where to build. The simpler rule is to stop taxing the parts American assemblers need. That would give up some customs revenue and some protection for American parts makers, and I would accept both to keep the assembly lines here.

In November the president proposed a tariff dividend^[32] of “at least $2,000 a person,” excluding “high income people,” in a post that also discussed paying down the national debt, without saying how often it would be paid. If the payments are designed like the pandemic-era Economic Impact Payments, which went to adults and children, the Committee for a Responsible Federal Budget estimates that each round would cost about $600 billion. Paid every year, the dividends would cost $6 trillion over a decade, roughly twice what the tariffs are expected to raise, and a tax sold as a way to pay down the debt would be rebated with borrowed money. Kept revenue-neutral, current tariffs could pay one every other year, starting in early 2027. Either way, the tariffs were sold on factories, and the factories are the part still owed. Nobody wants to be the temporary cost. In Manning, by Kamler’s account, 64 workers already are.