NextFin news, On Monday, September 22, 2025, the Financial Times released a transcript of an interview with Martha Gimbel, executive director of Yale's The Budget Lab and former adviser to the Biden administration, analyzing the effects of tariffs imposed during Donald Trump's presidency.
Gimbel explained that while tariffs have historically been a minor source of US federal revenue, Trump's tariffs have increased customs duties' contribution to government funding. The Congressional Budget Office estimates that tariffs could raise $4 trillion over the next decade, although Gimbel's team projects a slightly lower figure due to uncertainties in economic responses and compliance.
Despite the revenue gains, Gimbel emphasized that tariffs are unlikely to reduce the US trade deficit and may slow economic growth and job creation. She noted that sectors reliant on imports and immigrant labor have experienced employment challenges, partly due to tariffs and other policy changes such as immigration restrictions.
The interview highlighted legal disputes over the tariffs' legitimacy, with two court rulings against the president's authority to impose tariffs without congressional approval. Trump has vowed to appeal to the Supreme Court, which currently presents an uncertain outcome. If overturned, tariff revenue could drop significantly but not disappear entirely, as alternative tariff mechanisms exist.
Gimbel also discussed the distributional effects of tariffs, noting that lower-income Americans bear a disproportionate burden due to higher spending on goods subject to tariffs, while wealthier individuals spend more on untaxed services. She warned that reliance on tariff revenue might complicate future fiscal policy, especially amid challenges faced by the IRS in tax collection.
Regarding the US labor market, Gimbel observed a recent slowdown in job growth and rising unemployment rates, though still historically low. She attributed some weakness to policy uncertainty and the combined effects of tariffs and immigration restrictions, which reduce labor supply and economic dynamism.
Looking ahead, Gimbel predicted that the cumulative impact of tariffs and related policies might resemble a slow drag on economic growth rather than an immediate recession, potentially lowering annual growth rates over the next decade. This gradual effect could reshape the US economy's trajectory, with tariff revenue becoming a persistent but controversial fiscal tool.
The interview was conducted by Claire Jones, FT's US economics editor, and forms part of The Economics Show podcast series, providing in-depth analysis of current economic policies and their implications.
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