synopsis

The remarks have come amid fears that the global trade war triggered by Trump tariffs will tip the U.S. economy into a recession and reignite inflationary pressure.

President Donald Trump's "Liberation Day" tariffs announced in early April have stirred macroeconomic worries and cast a pall of gloom on the financial markets. However, the president hopes the levies will work out for the larger good of Americans.

In a Sunday post on the Truth Social platform, Trump said income taxes would be "substantially" reduced or even completely eliminated when tariff revenue kicks in. He added that the "Focus will be on people making less than $200,000 a year."

Trump also touted "massive" job creation through the construction of new plants and factories. "It will be a BONANZA FOR AMERICA!!! THE EXTERNAL REVENUE SERVICE IS HAPPENING!!!" he added.

The remarks have come amid fears that the global trade war triggered by Trump tariffs will tip the U.S. economy into a recession and reignite inflationary pressure. Prediction market platform Polymarket has put the odds of a U.S. recession at 56%.

Trump's claim of additional revenue isn't completely unfounded. Data released by the U.S. Treasury last week showed that revenue from customs duties rose more than 60% month-over-month in April, bringing in at least $15 billion, a Bloomberg report said.

The report also noted that daily collections, paid at the time of importing, also climbed 40%.

The collections included the 25% levies on steel and aluminum but did not account for the 10% across-the-board baseline tariffs. The report said that when these are being accounted for, tariff-related revenue could rise even further.

After he assumed office, as part of his administration's 100-day agenda, Trump signaled that he would renew $4 trillion in expiring GOP tax cuts.

According to JPMorgan's estimates, the reciprocal tariffs could raise $400 billion in new revenue, the Telegraph reported just after the president announced the measure. Citi estimates these levies would raise at least $700 billion for the treasury. 

In his White House Rosen Garden speech announcing the tariffs, Trump said, "For years, hard-working American citizens were forced to sit on the sidelines as other nations got rich and powerful, much of it at our expense."

"But now it's our turn to prosper and, in doing so, use trillions and trillions of dollars to reduce our taxes."

Not all are on board with the president's promise of beefing up Americans' disposable income. Economists see a big hit to the country's GDP growth. 

In a report released in mid-April, the Tax Foundation said, "Combined, the U.S.-imposed tariffs and the threatened and imposed retaliatory tariffs reduce US GDP by 1.0%."

With the 90-day pause on tariff implementation on most trading partners, Washington strives to negotiate favorable trade terms on a case-by-case basis. 

The SPDR S&P 500 ETF (SPY) exchange-traded fund (ETF) ended Friday's session up 0.72% at $550.64, and the Invesco QQQ Trust (QQQ) ETF jumped 1.11% at $472.56.

For the year-to-date period, the SPY and QQQ are down over 5.8% and 7.4%, respectively. 

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