“We’re making $3 billion a day.”
– President Trump, about his new tariffs plan.
The Trump administration would have you believe that the tariffs will be a massive moneymaker for the US government. White House trade adviser Peter Navarro claims that the U.S. will raise about $600 to $700 billion a year from tariffs, or $6-7 trillion over a decade. Add the proposed auto tariffs to that and he projects another $100 billion annually. Trump took an even stronger stance, claiming that tariffs have brought in $3 billion a day since he took office.
The administration may be relying on numbers issued by the U.S. Customs and Border Protection Agency which, on April 8, stated that it has collected over $200 million per day in “additional associated revenue” from 13 of Trump’s tariff-related executive actions that have been recently implemented under the new administration. According to a Treasury Department daily financial statement, as of April 15, the U.S. had received more than $2.3 billion in customs duties and excise taxes for the month.
These aggressive numbers cited by the administration have elicited considerable skepticism among economists. Some believe the estimates are overly optimistic, while most call “optimistic” a generous overstatement and instead describe the numbers as completely nonsensical. Navarro’s math translates into a little over $1.6 billion a day, with Trump’s $3 billion claim almost double that.
What is the methodology behind these calculations? Scrutinizing these projections through the lens of financial accounting and valuation principles gives us some surprising answers – some of which clash with the administration’s confident narrative.
A deeper dive into revenue
Tariffs are a big part of an even bigger picture. The Unites States economy is a complicated ecosystem of global trade, and tariff wars can trigger complex ripple effects such as reduced trade, international retaliation, and supply chain disruptions – all of which will compound already existing volatility.
Let’s take all those factors and break them down to their most simplistic components, treating them like asset and liability line items on a balance sheet.
First, let’s define how to categorize potential revenue and cost.
Assets (Potential Revenue):
- Direct tariff collection from imported goods
- Potential growth in domestic manufacturing tax base
- Possible increased employment tax revenue
Liabilities (Costs):
- Retaliatory tariffs reducing export markets
- Supply chain disruptions increasing costs for U.S. businesses
- Consumer price inflation depressing spending
- Decreased import volume reducing tariff collection
Valuation Analysis: What will the tariff policy really cost?
Valuation concepts are used in financial analysis and capital budgeting to estimate the worth and pricing of businesses, assets, investments, securities, and intellectual property. They can help determine what creates or damages value. We can use valuation frameworks to weigh the tangible costs of tariff policies, such as increased import prices and retaliatory tariffs, against any anticipated economic gains.
We can look at opportunity costs, long-term return on investment, and how risk-adjusted cash flows may shift as the policies evolve. Essentially, we are analyzing tariffs as we would a major capital expenditure and scrutinizing, not only what it costs today, but what might be tomorrow’s added value.
We can apply valuation concepts to assess the tariff policy’s effectiveness:
- Return on Investment Analysis
If we consider a $10 trillion market capitalization loss triggered by tariff implementation as the “investment cost,” the financial metrics can be surprising:
- Payback Period: At $600 billion in annual revenue, it would take over 16 years to recover a $10 trillion market loss.
- Internal Rate of Return (IRR): If we treat the $10 trillion loss as an investment to generate $600 billion in annual returns, the implied IRR is around 6%– well below the risk-adjusted return threshold for most ventures.
- Comparison to Market Averages: Historically, the S&P 500 has averaged about 8% annual returns since 1928. By this standard, the tariff policy’s return, at 6%, underperforms the broader market.
- Discounted Cash Flow (DCF): Using an 8% discount rate (reflecting market opportunity cost) the calculation looks like this:
$10 trillion (market loss) – $7.4 trillion (DCF value) = $2.6 trillion (value loss)
Based on discounted future tariff revenues, the market “overpaid” by $2.6 trillion compared to what those cash flows are worth today. According to standard capital budgeting principles, the tariff policy would destroy economic value rather than create it.
If we strip away the political oratory, focus strictly on the numbers, and apply standard financial analysis techniques used to evaluate corporate investments, Trump’s tariff initiatives do not add up as a strong financial strategy. The revenues generated by tariffs could easily be offset by broader economic losses, especially when benchmarked against long-term market performance. President Trump, as a successful businessman, surely understands this. We can speculate that the goal of his tariff strategy is to negotiate better terms and lessen America’s dependence on foreign nations, but the market has yet to reflect those potential benefits.
That said, many supporters argue that the value of tariff policy can’t be expressed solely as a profit and loss statement. The strategic goals that Trump hopes to address—securing stronger trade agreements, reinforcing national security, and rebalancing global alliances—are outside the scope of traditional valuation calculations. These goals have intangible benefits that cannot be easily quantified. The benefits of Trump’s strident tariff policies may not be visible in short-term stock prices or economic indicators, but they could lead to stronger strategic positioning further down the road.
Ultimately, the combination of rhetoric and hard numbers leaves investors, businesses, and taxpayers questioning whether tariffs are a sound financial strategy or a costly economic experiment – an answer that will only become clear with time.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
