ANALYSIS and OPINION
Most students of internationnal business learned long ago that tariffs are an idea generally frowned upon by the father of free market capitalism and free trade, Adam Smith and his chief disciple David Ricardo. This is because they not only cause people to pay higher prices than if there were no tariffs, but also because tariffs have a tendency to cause trade wars, which sometimes cause real ones. (Apparently, President Trump didn’t go to class the day tariffs were discussed.) Below is a transcript of our conversation with ChatGPT where we try to come up with a “back of the envelope” rough calculation of how much, if any, effect Trump’s tariffs have had on inflation. Our figures show that inflation has increased by somewhere between 0.5% and 0.8% because of Trump’s tariffs. (And, according to ChatGPT, our calculation is very consistent more highly researched and extensive studies that have been done by various think tanks, interest groups and academics.)
One important characteristic of tariffs, however, is that once they are imposed, if they are left alone and not increased they should have little or no future inflationary effect. On the otherhand, if the tariffs were reduced or removed, it would give sellers room to reduce prices. Unfortunately, most economists will tell you that prices are “sticky” meaning that sellers don’t always reduce prices when their production costs (and/or taxes or tariffs) go down–preferring instead to hold prices steady and pocket additonal profit. We say this, because at this point even if the Trump administration were to remove all tariffs, there’s no guarantee that prices would fall all the way back down to where they were when Joe Biden left office.
We were going to do a video on this subject, but frankly other news is diverting too many of our resources.
Below is our chat with ChatGPT
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[Rx is our name for ChatGPT.]
Rx. Federal revenues collected by the U.S. government for each fiscal quarter for the period January 1, 2025 to June 30, 2026. (a total of 6 quarters). What portion was from taxes and non-tariff related sources and what portion was from tariffs.
Using Treasury’s net budget receipts figures, and treating “tariffs” as customs duties, the six calendar quarters were:
| Calendar quarter | Total federal revenue | Tariffs/customs duties | Taxes and all other non-tariff receipts | Tariff share |
| Jan.–Mar. 2025 | $1,177.4B | $22.8B | $1,154.6B | 1.9% |
| Apr.–Jun. 2025 | $1,747.8B | $64.4B | $1,683.4B | 3.7% |
| Jul.–Sep. 2025 | $1,226.5B | $86.8B | $1,139.6B | 7.1% |
| Oct.–Dec. 2025 | $1,224.8B | $90.0B | $1,134.8B | 7.3% |
| Jan.–Mar. 2026 | $1,257.9B | $76.5B | $1,181.4B | 6.1% |
| Apr.–Jun. 2026 | $1,668.6B | –$3.5B | $1,672.1B | –0.2% |
| Entire 18 months | $8,303.0B | $337.1B | $7,965.9B | 4.1% |
The surprising negative tariff figure for April–June 2026 is correct on a net-revenue basis. Treasury recorded approximately:
- April: +$22.1 billion
- May: –$42 million
- June: –$25.6 billion
Those negative months resulted from tariff refunds exceeding new customs-duty collections. Consequently, the government collected substantial gross tariffs during the quarter but, after refunds, experienced a net tariff outflow. Reuters reported the May 2026 refund reversal.
Calculations are from Treasury’s Monthly Treasury Statement: Table 3 for total receipts and Table 9 for customs duties. “Taxes and other non-tariff receipts” is calculated as total receipts minus net customs duties; it therefore includes income and payroll taxes as well as fees, earnings, and miscellaneous receipts.
Rx. Taking the tariff/customs figures for each of these quarters, what portion were related specifically to tariffs imposed by Donald Trump?
Treasury does not publish an exact quarterly division between:
- customs duties resulting from Trump’s new 2025–26 tariffs; and
- duties that would have existed anyway under the previous tariff schedule.
The most defensible approximation is therefore to subtract the customs revenue collected during the corresponding quarter of 2024—before Trump’s second-term increases—from each quarter’s customs receipts.
| Calendar quarter | Total net customs receipts | Estimated ordinary/pre-2025 duties | Estimated amount attributable to Trump’s 2025–26 tariffs | Trump-related portion |
| Jan.–Mar. 2025 | $22.8B | $18.7B | $4.0B | 18% |
| Apr.–Jun. 2025 | $64.4B | $17.9B | $46.5B | 72% |
| Jul.–Sep. 2025 | $86.8B | $21.4B | $65.4B | 75% |
| Oct.–Dec. 2025 | $90.0B | $20.8B | $69.2B | 77% |
| Jan.–Mar. 2026 | $76.5B | $18.7B | $57.7B | 75% |
| Apr.–Jun. 2026 | –$3.5B | approximately $17.9B | approximately –$21.4B | Not meaningful as a percentage |
| Total | $337.1B | $115.6B | approximately $221.5B | approximately 66% |
Thus, my best answer is that approximately $221.5 billion of the $337.1 billion in net customs receipts was attributable to Trump’s second-term tariff changes—or about two-thirds of the total.
Two important qualifications:
- The $4 billion estimate for January–March 2025 is particularly rough because most of Trump’s major new tariffs had not yet begun producing revenue.
- The negative $21.4 billion for April–June 2026 means that refunds of Trump’s invalidated IEEPA tariffs more than erased the estimated Trump-related collections for that quarter. It does not mean ordinary tariffs ceased being collected.
This approach is consistent with CBO’s finding that roughly $150 billion of approximately $300 billion collected between January 2025 and February 20, 2026 came from Trump’s IEEPA tariffs alone. That $150 billion excludes Trump’s additional Section 232 and other tariff increases, so total Trump-related revenue was necessarily higher. CBO analysis
I would regard $215–$230 billion as a reasonable range, with $221.5 billion as the central estimate.
Essentially yes, provided we use the economic meaning of inflation correctly.
If Trump left every tariff unchanged after June 30, 2026, and businesses had already fully adjusted their prices to those tariffs, then the tariffs would produce:
- A permanently higher price level;
- But no additional continuing inflation from that point forward.
Inflation measures the rate at which prices continue increasing, not whether prices remain high. A tariff that causes a product’s price to rise from $100 to $110 creates inflation while that adjustment occurs. If the price then remains $110, the tariff generates no further inflation—even though consumers continue paying the tariff-inflated price.
There are three qualifications:
- Delayed pass-through: Businesses may raise prices gradually as old inventory is exhausted or contracts are renewed. Inflation could therefore continue temporarily even with unchanged tariffs.
- Supply-chain effects: Tariffs on components can move through several production stages, producing later price increases.
- Year-over-year statistics: The tariff increase would remain visible in reported 12-month inflation until the original price increase passed out of the comparison period.
But once those adjustments were completed, unchanged tariffs would contribute approximately zero to the ongoing inflation rate. They would continue making prices higher than they otherwise would have been, but they would not make those prices rise continually.
So the precise formulation is:
Trump’s tariffs may have increased the price level permanently by approximately 0.5–0.8%, but—once completely passed through—they would contribute approximately zero to subsequent inflation unless tariff rates were raised again.
Your reasoning is correct. This is the same distinction economists make between a one-time price shock and persistent inflation.