Have you ever wondered why the Trump administration's new tariffs are not increasing inflation. The average new tariff rate is around 15%. Why isn't the price of imports increasing by 15%, thereby sharply increasing the average price of everything?
The answer is, the world economy has gotten so competitive that -
manufacturers are being forced to eat our tariffs.
They cannot increase the price of their products and still expect to sell anything. The tariffs are forcing the world manufacturers to just give the U.S. 15% to 20% of the cost of every product they sell into the U.S.
This tariff income is not chicken feed. Treasury Secretary Scott Bessent's projection as of July 2025 was that the U.S. had collected about $100 billion in tariff revenue in the first half of 2025.
He further estimated that our tariff income could grow to $300 billion by the end of 2025, if collections accelerate due to new tariffs. Remember, we just successfully reached trade agreements with Japan and the EU calling for a 15% tariff on goods sold to the U.S. and zero tariffs on U.S. goods sold into Japan and the EU.
To put this $300 billion in new tariff income into perspective, the entire 2024 tax revenue from corporate taxes was just $489 billion.
President Trump agreed to a very generous 20% tariff rate on Chinese goods coming in the U.S. The negotiators on both sides seemed very pleased, and once the details were ratified, it was felt by all concerned that trade between the two countries would quickly return to normal.
But the details were never negotiated. The problem is that no one in China knows who is in charge. Xi Jinping is under political attack. His supporters in the People's Liberation Army ("PLA") have all been purged. Several top generals - Xi's highest ranking military allies - "committed suicide" in padded jail rooms. Hmmm.
Xi Jinping destroyed China's economy when he threatened to invade Taiwan in 2027. Foreign investors fled the country with their tens of billions of dollars. Foreign manufacturers have stopped opening up new industrial plants, and many have moved their production to Vietnam, Indonesia, or Bangladesh. China's top billionaires and entrepreneurs have fled the country.
The Chinese people stopped much of their consumer spending and started hoarding for a four-year war. Xi has become a pariah, and the party elders wanted him out.
Zhang Youxia, the highest ranking general in the PLA, took over the military. Troops loyal to Zhang entered Beijing. Xi was to be forced to turn over power peacefully in August. But then something odd happened.
The plan for Xi's ouster has met a snag. Two "civilian" members of the CCP were to take over parts of Xi's job. One was to be the head of the CCP. The other was to the President of China. Zhang was to be the third member of the triumvirate, as commander of the military forces.
But... the two civilian members of the triumvirate have gotten cold feet. No one wants to lead China right now. The economy is suffering from deflation, and it is a mess.
So with his troops occupying Beijing (the tanks are underneath separate canvas covers), Zhang is in a real pickle. No civilian want to take over the Chinese Communist Party and no civilian wants to become President. Zhang himself is too old to do either job.
Zelensky is still the President of Ukraine. Countries don't like to change leaders in the middle of a war. If only China was at war with Taiwan, Japan, South Korea, Australia, and the United States...
No one would be purging Xi Jinping and placing him in a padded cell. Just sayin'.
