On April 2, the White House released a ‘Fact Sheet’ to complement Trump’s so-called Liberation Day speech. The document entitled: President Donald J. Trump Declares National Emergency to Increase our Competitive Edge, Protect our Sovereignty, and Strengthen our National and Economic Security, outlines various ‘facts’ about how the President’s tariff policy came to be.

Buried in the very last point under the sub-heading “Tariffs Work” was the basis for the 10% global tariff. The White House referenced “a 2024 economic analysis found that a global tariff of 10% would grow the economy by $728 billion, create 2.8 million jobs, and increase real household incomes by 5.7%.”

Okay, great – but there was no link to the report, no source for the report, and no indication of who the great minds were behind this publication. Was it in some Economics Journal that allowed the report to be subject to analysis and critic by a group of peers? Was it developed by a group of economists or just one? Who was behind the report that led the government to implement such a wide-reaching policy?

It turns out the ‘report’ is from the Coalition for a Prosperous America, an industry group that proudly states on its website that it exclusively represents American Manufacturers and Producers. A core demographic that benefits from tariffs.

The report’s author, Jeff Ferry, Chief Economist at the Coalition for a Prosperous America, has also published work with the American Conservative and widely supports protectionist policies.

While one would expect an industry group to promote what benefits their members – that is the whole point of the organization – it is interesting that the White House would source this specific report.

The report is entitled Global 10% Tariffs on U.S. Imports Would Raise Incomes and Pay for Large Income Tax Cuts for the Lower/Middle Class.

In the report, Mr. Ferry states that he estimates that the tariff would generate an estimated “$263 billion, which could then be used to provide a ‘substantial $1,200 tax refund to lower-income households and refunds of 3-4% of income for middle-income households…and real household incomes would rise by 5.7%…which would more than offset a small, initial price impact of half a percentage point per year.”

He also concludes that “results show progressive impact on taxation, i.e., lower/middle income households benefit more than upper income households.”

While buried in the report, he makes the assumption that a “tariff raises prices by 3.2%, raising the cost of consumer spending.” He then argues that his proposed tax cuts would offset the inflationary impact of the tariffs.

Here is where Mr. Ferry is wrong.

Rising prices from tariffs don’t discriminate.

All consumers – regardless of income level – will pay the higher prices. The higher prices will disproportionately affect lower- and middle-class households, as they have less disposable income to spend on the higher cost of goods, which inherently makes their household budget tighter and puts them in a more precarious position.

Furthermore, and this is the point that Mr. Ferry’s report misses, tax cuts disproportionately benefit higher-income households, because the vast majority of lower-income households pay no income tax.

It has been widely reported that roughly 47% of U.S. households pay no Federal income tax. While this number doesn’t account for payroll taxes that some of these households do pay into, even if you were to exclude those that do contribute via payroll taxes, the net number of families that pay no federal tax is 28%. The reason they pay no tax? They don’t earn enough.

Even at the conservative figure of 28% of households (though it is easy to argue that the 47% number would all likely be negatively impacted), those households will still see their prices rise due to tariffs, yet will gain zero benefit from any income tax cut. So, in essence, they will be worse off under Trump’s new tariff policy.

Counter that with high-income households, who inherently have more disposable income to soften the blow of any price increases, but will also benefit from significant income tax cuts, resulting in them having even more money in their pockets.

The ultimate result is that the income inequality gap will continue to grow, leaving low-income families even further behind.