Tariffs and Trade Policy: Revenue, Prices, and Retaliation

The US imported approximately $3.2 trillion in goods in 2024. A universal 10% tariff on all imports would generate revenue, but some is offset by: (a) reduced import volumes, (b) consumer price increases, and (c) retaliation against US exports. Pass-through assumptions: - 60% of tariff is passed to consumers as higher prices - Import price elasticity = −0.50 (a 10% price rise reduces imports 5%) - Only 70% of imports are effectively covered (exemptions, existing tariffs) Using these assumptions, estimate the annual tariff revenue. Formula: Revenue = Tariff Rate × Import Base × Coverage × (1 − Volume Reduction) Enter your estimate of 10-year tariff revenue (in $B).

A universal 10% tariff raises consumer prices by roughly 6% on imported goods. Since lower-income households spend a larger share of their income on traded goods, the per-household cost as a share of income is regressive. Estimated per-household annual cost by quintile: - Bottom: ~$900/year (8% of $11K income) - Second: ~$1,200/year (4.7% of $26K) - Middle: ~$1,500/year (3.2% of $47K) - Fourth: ~$1,700/year (2.2% of $79K) - Top: ~$2,200/year (1.2% of $183K) The US has ~130 million households. The total annual consumer cost is: (900 + 1200 + 1500 + 1700 + 2200)/5 × 130M = ? Enter the total annual consumer burden in billions.