Search

Market Discussion Series Part 7: Tariffs vs Gasoline Price Shocks — Similar?

Tariffs vs Gas Price Shocks — Similar?

For the month of June 2025, the federal government collected about $20 billion more in tariffs on imports than it did in the same month in 2024 (US Treasury). That would be an annual incremental increase of $240 billion. 

But we also know that the Trump tariff policy is still in formation, as we have seen with the recent announcement after President Trump’s July 22 meeting with Philippines President Marcos and his July 27 agreement with the EU. The flow of tariff news continues (see https://tariffcheck.org/updates), and the August 1 deadline looms.

The latest estimates indicate that the tariff policy shock will exceed $300 billion a year. Will that be an accurate number? Nobody knows.

But we do know that tariffs are a tax. And we do know that they are collected by customs agents at the time the goods enter the US. And we do know they are remitted to the US Treasury. So a politician can say the tariff is on this country or that country, but the truth is that tariffs are a sales tax imposed on the domestic American consumer within the boundaries of the United States. 

Some readers have asked for a way to understand this impact. It is a fair question, since there hasn’t been a tariff initiative like Trump’s since the Great Depression era under President Hoover, with the Smoot-Hawley tariffs of that period. 

With this request in mind, we selected a way to quantify the tariff shock in simple terms, utilizing a commodity that is widely known and broadly consumed: gasoline.

The most recent data from the US Energy Information Administration (EIA) indicates that total US gasoline consumption in 2024 was 134.6 billion gallons. This figure is derived from the “products supplied” metric, which closely approximates actual consumption. This is consistent with prior years, where consumption hovered around 134–136 billion gallons annually (also EIA). Therefore, each additional penny per gallon added to the gasoline price results in a policy shock of about $1.35 billion per year ($0.01 x 135 billion gallons). 

Then, dividing the estimated $300 billion/year tariff policy shock by $1.35 billion/(penny/gallon), we find that the Trump tariff policy appears to generate an economic shock equivalent to a tax increase of over $2 a gallon on gasoline.

Think about that in terms of the “hit” ahead for the US economy. 

Tariff Shock equivalent to $2/gallon gas tax?

(Images sourced from Shutterstock)

Share this article

Facebook
Twitter
LinkedIn
Email

More Posts

Blog image for The Kotok Report - Fishing for AI at Leen's Lodge.png

Fishing for AI at Leen’s Lodge

We’re cooking up some serious AI conversations along with our fish in Maine. One of our panels during the gathering focused on AI. Two experts contributed, and Eric Hale moderated with aplomb and élan. The Q&A and the continuing post-panel conversation were fierce. There is a report on the panel, along with the associated survey; and in it there can be found 16 AI usage recommendations.

Healthcare in the US: Pillars & Sledgehammers

Healthcare in the US: Pillars & Sledgehammers

Our time at Camp Kotok included a riveting discussion around US healthcare policy, funding, and implementation. We follow up this morning with a report on policy blows to the functionality of US healthcare system.

Title graphic for Kotok Report - 777 Partners Bankruptcy

777 Partners Bankruptcy

I strongly recommend readers take 4 minutes to read Chris Whalen’s IRA, “777 Partners and the End of Private Credit.”

“People in the private credit trade will tell you that raising new money today is almost impossible. Why? Because there are growing signs of contagion in the insurance sector…”

Contact David

David would love to hear from you. Please Feel free to reach out and send an email.

Skip to content