On Friday evening, the Trump administration announced it would stop collecting all tariff revenue for three months, effective immediately. In ordinary times, the news would have been front page news for days. Instead, as with many late-Friday news dumps, it has gone virtually unnoticed. As it turns out, this may be the right response, for two reasons.
First, implementation has been contradictory and uncertain. Over the last week, U.S. Customs and Border Protection had been notifying some companies that some tariffs would be temporarily suspended, but on Thursday, it published a notice saying they wouldn’t. Then on Friday, a senior administration official announced that all tariffs would be suspended for three months, but then President Trump described the announcement, which had been reported by The Wall Street Journal, as “fake news.”
Second, companies would still have to pay the tariffs, just later—assuming the freeze happens at all. That means that when things start going back to normal, companies and consumers will be hit with an outsized tariff bill. The administration has not announced yet when it would collect the deferred tariff revenue, which makes it harder for companies to start rainy day funds to afford the shock payments. How much should they hold back, and for how long? How much of the savings can go to immediate expenses like payroll, rent, and utilities? Moreover, the eventual make-up payments will cancel out part of the $2 trillion stimulus package President Trump just signed.
This confusing mess needs to be resolved soon, one way or another. When Congress reconvenes, it should pass legislation to reclaim the tariff-making power it delegated to the president in the 1960s and 1970s. The Trump administration has already proven it cannot use its tariff powers responsibly. Now it is proving it cannot even handle temporary rollbacks competently. A tariff rollback, even if temporary, could be helpful to companies and consumers during tough times. But the contradictory official statements, the fact that the tariffs are deferred rather than canceled outright, and the uncertain timeline for revenue collection, are creating a mess. Companies and consumers won’t actually save any money, and they have no timetable for making deferred payments.
For more on a responsible trade agenda, see the CEI paper “Traders of the Lost Ark.”