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Politico
12 hours ago
- Business
- Politico
Where are Trump tariffs on the Laffer Curve? Ask Arthur Laffer
Presented by Editor's note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro. Quick Fix President Donald Trump has described Arthur Laffer's back-of-the-napkin theory that lower income taxes can boost revenue as the stuff of legend. But right now, the progenitor of the Laffer Curve and longtime Trump confidant doesn't see much evidence supporting the administration's claims that the aggressive tariff regime is poised to fill the government's coffers and reignite the economy. Tariff-related revenue has rocketed since customs began collecting on the new duties Trump has imposed on imports. The president has framed the taxes as a massive windfall that could unleash a 'BONANZA FOR AMERICA!!!' if paired with income tax cuts. Laffer told POLITICO that the net effects are probably 'rather minuscule either way.' 'By raising tariffs, of course, you do collect more money per unit of import — that's true,' said Laffer, who advised Trump during the campaign and continues to be a strong backer of the president's agenda. 'But it's also true that you cause weakness in the economy and you lose revenues elsewhere in the system. The net effect is probably not very large either way.' Laffer has long been skeptical of Trump's approach to tariffs. But his points about the negligible effects of the administration's ever-changing trade policies are notable given the president's public support for Laffer's most famous theory. What's more, many economists believe that the Laffer Curve — which describes the relationship between rates and revenue as a bell curve where higher taxes lead to diminishing collections — can be an important tool for assessing the effects of Trump's tariff agenda. James Pethokoukis, a senior fellow at the conservative-leaning American Enterprise Institute, put it this way in a recent blog post: '[The Laffer Curve] suggests unavoidable and unpleasant trade-offs for Trumponomics supporters: The Trump administration wants tariffs to both reduce the trade deficit and increase revenue—goals that fundamentally conflict.' Laffer said an across-the-board tariff could be a 'nice revenue raiser' so long as it wasn't opened up to exemptions, credits or other deductions. And even then, it would only yield an economic benefit if the revenue was used to reduce other forms of taxation that are 'more deleterious' to the overall economy, he said. Nevertheless, 'it's not as good as an income tax as far as collecting revenue goes,' Laffer said. Trump, along with Treasury Secretary Scott Bessent, has listed income tax relief among the many goals of the trade regime. Unsurprisingly, Laffer sees a lot of upside in the tax cuts included in Trump's 'big, beautiful bill' — particularly with regard to the elimination of taxes on tipped income, as well as a new deduction for auto loan payments — and said it would be 'very bad for the economy' if Congress fails to pass the measure. But 'there is no doubt in my mind that trade protectionism will hurt the economy a lot,' he added. 'The question is: What will Trump's actions do?' Laffer said. 'My guess is they'll make for freer trade, not for more protectionism. I think he really wants [other countries] to come to the table and reduce their tariffs on us, and that would be wonderful, and we should have those tariffs lowered.' 'Will he actually do that? I don't know.' IT'S TUESDAY — As always, send your tips, suggestions and personnel moves to Sam at ssutton@ Driving The Day Senate Finance votes on Bill Long's nomination to serve as IRS commissioner at 9:30 a.m. The committee holds a nominations hearing on picks including Brian Morrissey Jr. to be general counsel at Treasury at 10:30 a.m. … The U.S. Chamber of Commerce kicks off its Capital Markets Summit at 9:35 a.m., with speakers including Acting Comptroller of the Currency Rodney Hood, NASDAQ President Nelson Griggs, SEC Commissioner Mark Uyeda, acting FDIC Chair Travis Hill, Sen. Mike Rounds, Rep. Bill Foster, House Financial Services Chair French Hill and Deputy Treasury Secretary Michael Faulkender. The Brookings Institution holds a discussion on the earned income tax credit at 10 a.m. … The Council on Foreign Relations holds a discussion on the U.S. economic outlook and monetary policy at 1 p.m. … Hill speaks at a stablecoin event hosted by the Atlantic Council and WilmerHale at 1 p.m. … SEC Chair Paul Atkins testifies before Senate Appropriations at 2:30 p.m. … Sort of the opposite of 'go woke, go broke' — White-shoe law firms that cut deals with the Trump administration to avoid punishing executive orders are losing Wall Street clients to institutions that challenged the president's directives, the WSJ's Erin Mulvaney, Emily Glazer, C. Ryan Barber and Josh Dawsey report. Fantastic news for lazy 'Game of Thrones' headlines —JPMorgan Chase CEO Jamie Dimon said he's still 'several years away' from retirement, during an appearance on Fox Business on Monday. Trouble in Treasuries — With tariffs hanging over the economy, analysts say longer-dated Treasury securities may continue their slump ahead of Friday's jobs report, per Bloomberg's James Hirai and Michael Mackenzie. The Economy It's not the policy, it's the uncertainty — Federal Reserve Bank of Chicago President Austan Goolsbee said the economy's solid fundamentals would allow the central bank to proceed with rate cuts, per Bloomberg's Catarina Saraiva. But that will depend on greater certainty around trade policy. Deeper — The manufacturing sector continued to contract in May as tariffs and other policy risks dented new orders and hiring, according to the Institute for Supply Management's closely watched monthly index. The expiration of the boom — South Florida's real estate market exploded during the pandemic. But a slowdown in migration to the region, coupled with higher interest rates and mortgage costs, has led to a dropoff in home sales, Bloomberg's Anna Kaiser reports. New poll — A new Pinpoint Policy Institute poll conducted by Trump's campaign pollsters Fabrizio Ward found that the president's approval rating was slightly underwater at 46 percent to 49 percent. While Trump still maintains a 45 percent-39 percent edge over congressional Democrats on economic policy, a whopping 78 percent of those surveyed said they are worried about the cost of everyday goods. Furthermore, 69 percent said they are worried about their tax burden and 63 percent sait they are worried about retirement savings or investments. The survey of 800 registered voters was conducted from May 15-19. At the regulators Watch this space — Katy O'Donnell reports that the Trump administration has placed two officials at the Federal Housing Finance Agency on leave. The shakeup sidelined Anne Marie Pippin, senior associate director and former deputy director of the Division of Conservatorship Oversight and Readiness, as well as Maria Fernandez, senior associate director of the Office of Housing and Regulatory Policy. Shake up at the statistical agencies — As Trump floats moving the Bureau of Labor Statistics under Commerce, Nancy Potok, the former chief statistician at the Office of Management and Budget, along with former BLS chief Erica Groshen have an op-ed in Science on how 'the administration's appetite for disruption [might] be harnessed to modernize federal statistics.' Jobs report Former Assistant Secretary of the Treasury for Economic Policy Eric Van Nostrand has joined Lazard Asset Management as its global head of markets and chief economist. Van Nostrand, a top adviser to former Treasury Secretary Janet Yellen, was previously a portfolio manager and managing director at BlackRock. Natalia Díez Riggin, a former top staffer to Senate Banking Chair Tim Scott and Sen. John Kennedy, has been named the SEC's director of legislative and intergovernmental affairs. She's been serving in the role in an acting capacity since January. — Declan Harty
Miami Herald
4 days ago
- Business
- Miami Herald
Donald Trump Accuses China of Violating Deal After He Tried to Be Nice
President Donald Trump has accused China of violating its preliminary trade agreement with the United States, and suggested he would take further action. On May 12, the U.S. and China agreed to a 90-day suspension of most tariffs on each other's imports. The deal was reached after Trump imposed huge tariffs on Chinese imports, before Beijing retaliated. Writing on Truth Social on Friday, Trump said: "Two weeks ago China was in grave economic danger! The very high Tariffs I set made it virtually impossible for China to TRADE into the United States marketplace which is, by far, number one in the World. We went, in effect, COLD TURKEY with China, and it was devastating for them. "Many factories closed and there was, to put it mildly, 'civil unrest.' I saw what was happening and didn't like it, for them, not for us. I made a FAST DEAL with China in order to save them from what I thought was going to be a very bad situation, and I didn't want to see that happen." He added: "Because of this deal, everything quickly stabilized and China got back to business as usual. Everybody was happy! That is the good news!!! The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!" This is a breaking story. More to follow. Related Articles Scott Bessent Says Trump's China Trade Talks 'Stalled': Live UpdatesGiant Construction Projects Boom as U.S. Lifts Syria SanctionsWhy MBS Is Keeping the Pressure on Iran | OpinionConsumer Trauma and the Ongoing Psychological Toll of Trumponomics on Americans | Opinion 2025 NEWSWEEK DIGITAL LLC.
Bloomberg
6 days ago
- Business
- Bloomberg
Why Tariffs Won't Fix America's Problems
On Trumponomics, author Richard Baldwin warns that Donald Trump's trade war won't accomplish its stated goals—and that the world may simply move on. Subscribe to Trumponomics on Apple Podcasts Subscribe to Trumponomics on Spotify Imposed unilaterally and outside the guardrails of the World Trade Organization, the president's tariffs represent a sharp break from decades of US policy. Baldwin, author of The Great Trade Hack: How Trump's Trade War Fails and Global Trade Moves On, tells host Stephanie Flanders, Bloomberg's head of Economics and Government, that the levies weren't about reciprocity or even results. Instead, they are about 'grievance.'
Bloomberg
22-05-2025
- Business
- Bloomberg
Bond Investors Are Voting Against Trump's Big Tax Bill
On the new episode of Trumponomics: Stephanie Flanders, Bloomberg's head of government and economics, leads a panel from the Qatar Economic Forum in Doha to explore the question of what Trumponomics means for the Middle East. It turns out the answer may be—as Donald Trump would put it—a lot of winning. Listen on Apple, Spotify, or wherever you get your podcasts. The warnings from the world's biggest bond market on the US fiscal mess are getting louder.
Bloomberg
21-05-2025
- Business
- Bloomberg
Why Trump Is Good News for Gulf Nations
By and Stephanie Flanders Save Subscribe to Trumponomics on Apple Podcasts Subscribe to Trumponomics on Spotify On this episode of Trumponomics, host Stephanie Flanders, Bloomberg's Head of Government and Economics, leads a panel from the Qatar Economic Forum in Doha to explore the question of what Trumponomics means for the Middle East. It turns out the answer may be—as Donald Trump would put it—a lot of winning. 'The Gulf is well positioned to be a winner, certainly with this administration,' according to Dina Esfandiary, Middle East geoeconomics lead for Bloomberg Economics. 'They represent and they present themselves to be everything that the Trump administration likes: The glitz, the glamor, the money—all of these things are very attractive to this administration.'
