Economist Justin Wolfers pushed back against President Donald Trump’s inconsistent recent remarks on trade deals, taxes, and tariff revenue, calling his position "fundamentally incoherent."
What Happened: On Tuesday, the Australian economist dismissed Trump's claim that tariff revenue could be used to reduce or eliminate income taxes. Speaking on Yahoo Finance's The Morning Brief, Wolfers was blunt: “The president is lying, it's that simple,” he said, adding that there is “no bill, process, or proposal to Congress” backing such a plan.
What’s more concerning than the claim itself is the "fundamental incoherence" of Trump's position, arguing that tariff revenue could replace income taxes, while simultaneously pushing for trade deals that would reduce those very tariffs, Wolfers says.
“The president's got a choice,” Wolfers says. He can either strike trade deals that open global markets to American businesses and give U.S. consumers access to international goods, or “stick with very high tariffs and get some revenue out of it — you cannot have both.”
“That's the whole problem with this tariff policy, what the president wants has changed day to day,” Wolfers says. He noted that the rationale behind it all has shifted repeatedly, from national security and reshoring manufacturing to raising revenue and cutting the trade deficit.
This uncertainty, Wolfers says, is making it difficult for businesses to plan ahead, much like America's foreign trade partners, who need clarity on whether and how to engage in negotiations with the U.S.
Why It Matters: Wolfers has been a vocal critic of Trump’s tariffs and chaotic economic policies since the very beginning, posting just a day after “Liberation Day” that the tariffs would be “monstrously destructive,” and would ultimately hurt “working Americans more than anyone else.”
Several other leading experts have been skeptical of Trump’s proposal to replace income tax with tariffs over the past week. Mark Zandi, the chief economist at Moody’s stated that the IRS has already collected $1.14 trillion in income taxes this year, and that “If you get to $100 billion to $200 billion [in tariff revenue], you’ll be pretty lucky.”
The administration's “shock and awe” tariff strategy has drawn some support, including from Andrew Beal, founder of Beal Financial Corporation, who argued that the tariffs are necessary to promote fair trade and redefine America's role in the global economy.
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