Donald Trump's US tariffs: record revenues and the risks for the economy

$600 million in revenue from tariffs per day: Donald Trump (79) never misses a day praising himself for his tariff policy. Indeed, US budget revenues rose to a record $526 billion in June – partly due to tariff revenues, which also reached a record of nearly $28 billion in June. For the entire second quarter, they totaled around $64 billion, and the trend is rising.

Does the simple formula of "less taxes for wealthy US citizens, more revenue from tariffs" really work? Will Trump ensure sustained increases in US government revenue without jeopardizing the US economy? Will US inflation remain in check despite the tariffs? Economic data is still so robust that Trump and the US stock markets are triumphant.

But the seemingly solid US economy is beginning to show cracks. Inflation in the US rose to 2.7 percent in June (May: 2.5 percent), an increase that was in line with expectations. According to the US analysis firm Inflation Insights, the fact that US tariffs have not yet had a significant impact on US prices is due to several factors.

First, warehouses in the US are still so well stocked for many goods that they can be sold off. Second, many larger companies like Amazon and Walmart have so far been impressed by Trump's threats and are complying with his demand to "swallow" the import tariffs at the expense of their own profit margins and not pass them on to consumers in the form of higher prices ("eat the tariffs").

Inflation risk: Prices in certain product categories, such as clothing and furniture, have already risen significantly in June. Data from US banks and lending companies also show that US citizens, especially in the lower income brackets, are now more united than in the previous year.

The average tariff on imports into the US is currently 20.6 percent, according to calculations by the Yale Budget Lab. This is the highest tariff rate in 115 years. Because tariffs have a delayed impact on consumer prices, the Budget Lab estimates an additional burden of $2,800 per year for the average US household.

The extent to which Trump's tariff announcements have a short-term impact on certain goods is demonstrated by the example of copper: After the US President announced a 50 percent import tariff on the industrial metal, the price of copper rose to a record high within a few hours.

The US auto industry is already feeling the painful effects of tariff policy. General Motors, the largest US manufacturer by revenue, announced on Tuesday a 32 percent drop in profits to $3 billion for the second quarter: Tariffs alone accounted for the majority of the decline, at $1.1 billion . The entire industrial sector is suffering from rising prices for steel, aluminum, and copper.

Many of the tariff rates announced by Trump have not yet been finalized. The deadline for an agreement with the EU, for example, expires in a few days. The back and forth and the mix of threats and postponements are part of the Trump administration's negotiating tactics – and at the same time, they are creating great uncertainty among trading partners and US companies alike.

Once the long-term tariff burdens are determined, pressure on US companies to pass the tariffs on to consumers in the form of higher prices will increase, estimates Isabella Weber of the University of Massachusetts. "Others will then follow this example—the price dynamics are self-reinforcing," Weber told the WSJ.

This scenario does not yet take into account the negative effects on the US economy if trading partners decide to take countermeasures after failed negotiations. Therefore, there is considerable evidence that Trump's dream scenario—the US economy is booming, trading partners are paying, and inflation remains low—will prove to be a dream come true by the fall.