The $825 Billion Tariff Gap, Jul 28

Rachel: Trump said it plainly: We're going to pay off our national debt and maybe substantially reduce it with these tariffs. That's the promise. Substantially. CRFB's new math: $950 billion through 2036. That's the whole total? That's it. Fortune's calling it an $825 billion shortfall Jordyn: Wow. Rachel: against what he promised. Jordyn: On a $39 trillion debt. Rachel: Forty per cent. gap; Fortune's number, not mine. Jordyn: Okay, real talk, call that a canyon. Welcome to Red Flag, everybody, where promises meet spreadsheets. Jordyn, tell them what else we've got. There's also a $166 billion refund order CBP has to process. Rachel: Mm-hmm. Jordyn: By hand. By hand? 4.4 million labor hours, they're claiming. We'll get into it. Plus, Wyden's got a bill nobody in leadership wants to... To schedule a vote on. Quiet GOP dissent meet a locked counter. Rachel: Right. Jordyn: There's also a spice company and a watch company suing over these new tariffs, a second refund bill stacking right on top of that hundred and sixty six billion dollars, and we're each owning up to where we got tariff durability wrong this year. Playfully, friendly fires coming for both of us this week. So let's start with that nine hundred and fifty billion dollar number. Rachel: Remember, show your work, Rachel. Happy to. Here's where CRFB got it. CRFB put out an estimate Thursday. Tariffs raise about nine hundred and fifty billion dollars through twenty thirty six. Jordyn: Oh, I remember, we're going to be so rich, energy. Rachel: Right. Well, the receipt just landed. The Committee for a Responsible Federal Budget put out an estimate Thursday. Tariffs raise about nine hundred and fifty billion dollars through twenty thirty six. Jordyn: Wait, that's the whole haul against a thirty nine trillion dollar debt? Debt? Rachel: That's it." Fortune framed it Friday as a forty per cent shortfall on the plan. Jordyn: So somewhere between pay off the debt and collect a sliver of a tax something Rachel: Right. Jordyn: got lost. Rachel: Axios pegged the gap specifically at eight hundred and twenty five billion dollars less revenue than the White House projected. That's not a rounding error. Not even close. So here's my question for the whole episode: did the GOP actually reclaim its Speaker 3: government? Rachel: Did it claim its taxing power from the courts, or did it just agree to collect less of a tax it never had the authority to impose? Jordyn: In the first place-" Loaded start. Rachel: So what do the numbers behind that nine hundred and fifty billion dollars actually say? So, building on that nine hundred and fifty billion dollar number, let's run the actual variance report. Axios reported Friday the new tariffs bring in about one hundred and five billion dollars a year, replacing roughly sixty percent of what the old IEEPA regime would have collected. Jordyn: Wait, only 60%? So four and ten dollars just evaporate? Rachel: Gone. And CRFB's math says that's the difference. The difference between nine hundred and fifty billion under Section 301 and Section 338 versus one point seven trillion the emergency tariffs were projected to raise through twenty thirty six. That's not a rounding error. That's a canyon, right? And here's the kicker. CRFB says debt lands at one hundred and twenty two percent of GDP by twenty thirty six instead of one hundred and twenty. Two points doesn't sound like much when you say it fast. Two points of GDP is trillions of dollars, Jordyn. Nobody in this Administration is reading that number out loud. Jordyn: Okay, real talk. What about the new stuff? The Brazil tariff? The Canada one? Rachel: Brazil's the twenty five percent tariff. CRFB pegs it near fifteen billion dollars. Canada's proposed fifty percent Section 338 about forty billion. Jordyn: So combine that's what, like fifty five billion against an eight hundred and twenty five billion dollar hole? Rachel: It's a tip jar next to a mortgage payment. Jordyn: I mean, I'll take any silver lining. Rachel: It's not a silver lining. It's a rounding error dressed up as a policy win. Jordyn: Fair, but at least someone's collecting something. Rachel: Sure, if the goal was ever revenue and not just looking like they're doing something. Jordyn: And Rachel: Right. Jordyn: that's the scoreboard nobody wants to read. Rachel: Exactly; the shortfall's only half the ledger, too. Jordyn: Wait, there's a second half? Rachel: Oh, there is a second half-money already collected that has to go out the door. Jordyn: Oh, refunds? Oh, I want to hear this. Rachel: So flip that shortfall around-because half the hole isn't lost revenue, it's money already spent that now has to come back. Wait, give back how much? The Court of International Trade ordered about $166 billion in refunds on those IEEPA tariffs. Fortune is now citing estimates creeping toward $175 billion once interest lands. Jordyn: So the illegal tariffs aren't just struck down, they're literally being mailed back. Checks and everything. CBP told the court manual processing runs about 4.4 million labor hours across roughly 53 million entries from over 330,000 importers. 4.4 million hours? That's basically a second federal agency just for the- Rachel: Asks for paperwork. Somebody's building a whole career reconciling spreadsheets for a policy that lasted, what, a year? And that's the part nobody puts in the press release. Jordyn: Right. Rachel: You don't just lose the money you pay to unwind it. Exactly. They cashed the political win, spent the credit claiming it, and now they're mailing the bill to an army of customs clerks. Tariffs paying for themselves, just not the way anybody advertised. But I'm Tuss. Jordyn: But the part that matters most, this refund only exists because the tariffs were never legal to begin with. So how many more statutes do they try before one sticks? Rachel: Oh, buckle up, because that search for a loophole didn't stop. Short timeline because this statute hopping deserves a highlight reel: February 20th, Supreme Court rules six to three in Learning Resources versus Trump. IEEPA doesn't give the president tariff power. Period. Jordyn: Same day they pivot to Section 122, Rachel: Wow. Jordyn: that Nixon-era emergency. Rachel: Multi-surcharge nobody's touched since 1971. Jordyn: A flat 10% global, but 122 has a built-in cap, 150 days, no extension without Congress. Rachel: And that clock hit zero Thursday, July 24th, right on schedule. Jordyn: Which is exactly when the new Section 301 forced labor tariffs switch on. Rachel: Section 301, one sentence, it's the you're using forced labor hammer. Suddenly 60 countries qualify? Jordyn: Convenient Techtimes put the coverage at roughly ninety nine per cent of everything we import-and no sunset clause this time! Speaker 4: No expiration date, that's the tell: three statutes, eighteen months; I E E P A one twenty two, three o one. Jordyn: That's not trade policy. Speaker 4: That's a scavenger hunt for whichever legal hook survives the next lawsuit. And Congress just-watched. Jordyn: Which sets up the real fight, because Treasury's own math on what this switch costs doesn't match what CRFB found. Rachel: CHAPTER ONE Jordyn: Building on that statute case, let's test the receipt. Bessent went on Fox and said this straight up. Rachel: Oh, I remember this one. Jordyn: Rates go back to exactly where they were; only a de minimis decline in 2026, virtually unchanged. His words. Rachel: Okay, real talk, that's the tariff version of a serum promising results in one week. The label sounds great until you check the actual ingredients. Jordyn: ingredients. And the actual ingredients here are CRFB. They put replacement at under 60% of what IEEPA was pulling in. Speaker 4: Wait, Treasury says basically zero change, and the outside scorekeepers say $825 billion short through 2036? Through fiscal year 36, yeah. Same decade, wildly different math. That's not a rounding error. That's a different planet. Planet. So here's my actual question. Congress writes checks off somebody's number. Whose? Treasury's rosy one or CRFB's $825 billion hole? And that gap doesn't just sit there quietly. We tell you here who's actually writing the checks. Jordyn: Building on that number, let's talk about who actually pays it. Fortune broke down the new rates 10 to 12.5 percent. Canada, Mexico, UK get the low end. Speaker 4: And Japan, the EU and Korea are capped at 12.5. Sounds almost reasonable, right? Jordyn: Sure, if you ignore that it's still a tax. Speaker 4: Exactly. And OK, real talk. Axios talked to the guy who runs collective horology. a watch retailer. Jordyn: Oh, no. Speaker 4: He told Axios these Section 301 tariffs hamstring his business the exact same way the last two rounds did. No domestic substitute. You can't manufacture a Swiss movement in Ohio. Jordyn: Wait, how much has that cost him? Speaker 4: Over $160,000, and the refunds from the earlier tariffs haven't even landed yet. Jordyn: Of course not! Speaker 4: My read is a tax paid at the border is still a tax paid by the buyer, lower rate, wider net. That's not a tax cut, that's a bigger basket. Jordyn: And here's the part that kills me from my supply chain days: these businesses have repriced their contracts three times in eighteen months; IEEPA rate, then Section 122, now this: three spreadsheets, three panics. Every repricing costs money before a single tariff dollar even hits Treasury. That's the invisible tax nobody puts in the CRFB model. And that watch guy? Rachel: Wow. Jordyn: He's not just complaining on Axios. He's now a plaintiff. Shifting gears—that watch company, from last segment? They didn't just complain to Axios—they sued. Speaker 4: Wait, Collective Horology's an actual plaintiff now? Jordyn: Straight up—and a spice company right alongside it as co-plaintiff. Speaker 4: No way. Jordyn: Liberty Justice Center filed Burlap and Barrel versus Greer at the Court of International Trade on July twenty-fourth, the same day the new tariffs took effect. Speaker 4: Effect: A spice company and a watch company; not exactly a think tank's air-master. Jordyn: Which is the point: these are Main Street importers, not lobbyists with lawyers on retainer. Speaker 4: So what's the legal argument? Jordyn: The complaint says USTR set the rates first, then built the country findings afterwards to justify them. They're calling it backwards rule making. Speaker 4: Mm-hmm. Right. Jordyn: And the ask is big. Block enforcement plus refunds with interest. Speaker 4: Oh! refunds again! Jordyn: Stack that on the one hundred and sixty six billion dollar IEEPA order and you've got a second refund bill compounding before CBP finishes processing the first. Speaker 4: Treasury's just piling up liabilities Jordyn: Yeah. Speaker 4: nobody budgeted for. Jordyn: And Congress holds the power to stop all of this, so why hasn't it? it. Speaking of who actually writes the checks, Congress just got handed the pen back and barely picked it up. Speaker 4: Wait, what do you mean? Jordyn: Senator Wyden introduced the Congressional Trade Powers Reform Act on July 22nd. CNBC reported it faces long odds in a Republican-controlled Congress. Speaker 4: Long odds. Love that for dead on arrival. And it's not just Wyden. NBC News reported Rand Paul's been pressing his- Jordyn: his own party, asking why the party of lower taxes is defending what's basically a tax on imports. Speaker 4: Multiple GOP bills now require congressional approval before any new tariffs stick, so the dissonance bipartisan at least. Jordyn: On paper, that's the problem. Speaker 4: No, listen, Article 1's just handed back by the court. Congress has the taxing power, and Congress said no thanks. Keep it. Jordyn: Or leadership just isn't scheduling the floor vote. That's a choice, Jordan, not gridlock. Somebody's Speaker 4: Right. Jordyn: blocking the door. Speaker 4: A discharge petition could force it to the floor. Nobody's filing it. Jordyn: So we've got a court win nobody's cashing. Speaker 4: Article one's just sitting there like a gift card nobody opened. Jordyn: Oddly perfect! Speaking of things that age badly, wait till you hear who called this eighteen months out. Speaker 4: Oh, I already know where this is going. Jordyn: Okay, full disclosure time: eighteen months ago I said emergency powers might survive a legal challenge. I was wrong. Rachel: Wrong. And the court said so. Six to three. Jordyn: And I owe one too. I figured the tariff revenue number would hold up better than it actually did. Rachel: Fair. My durability call was off. But there's something that complicates this story. Grassley? Grassley. He's pushed his own trade review act for years. Same Article 1 argument long before this White House existed. Jordyn: So this was cross-party skepticism from the start. Republicans flagged the statute problem early, too. Rachel: Which means the whole partisan resistance framing doesn't really hold up. Jordyn: Yes, sometimes the boring constitutional nerds get it right. Rachel: Painful but fair. You missed revenue, I missed durability. Matching energy. Jordyn: Matching energy. One admission apiece, no more. Rachel: Deal. So what settles this next? Jordyn: Right. Rachel: That USTR excess capacity probe covering 16 trading partners is still open. Jordyn: Meaning another tariff tranche could land before this fight's anywhere near over. Speaker 4: BGHOST1hmm Rachel: Shifting gears, are USTR's excess capacity probe covering 16 trading partners is still open? Wait, so another tariff tranche could drop before the courts even rule? Exactly. The Congressional Research Service flagged Section 301 as exactly this kind of fallback authority. Okay, three things listeners can check themselves. One, does the Court of International Trade stop? Stop this Section 301 action. Two, do those refund checks from the IEEPA order actually reach importers not just sit in a queue? And three, does any tariff reform bill, Wyden's or otherwise, get an actual floor vote? Bookmark those. Six months from now we'll know which promise got kept—or which number got bigger. Okay, so if you take one thing from today, it's that the GOP didn't reclaim its taxing power. It just agreed to collect less of a tax it never had the authority to impose. Jordyn: Exactly. And that GDP hit we talked about? Nobody's saying that number out loud. Rachel: Because it's not a rounding error. Jordyn: Right. My favorite moment, though, was watching Congress win its constitutional fight. Rachel: And still not cash the check. A bill with actual GOP votes just sitting there, wild. Wild is the word. So watch those three things we flagged, the court injunction, the refunds, and whether that bill ever gets a floor vote. We'll be tracking all of it. If this got you thinking, send it to your one tariff-curious friend. Subscribe, leave us a rating, help the politically homeless find their people. Thanks for hanging out with us. See you next time.