Trump's Tariffs Bring Revenue, but Also Weigh Heavily on Business Bottom Line

Trump's Tariffs Bring in Revenue, But Also Act as a "Tax on Capital," Top Economist Says The Trump administration's tariffs have generated significant revenue for the US government, but they have also imposed a substantial burden on businesses, according to Morgan Stanley's chief economist, Michael Gapen. In his latest research note, Gapen concludes that tariffs have been a "tax on capital" so far, with corporations largely absorbing the escalating costs rather than passing them onto consumers. Financial Impact: According to Gapen's team, US corporations absorbed $24 billion in tariff costs in the second quarter of 2025, up from $14 billion in the same period last year. This represents a significant increase in the burden on businesses, which have been forced to offset higher non-labor costs with reductions in labor costs and profitability. Market Implications: The impact of tariffs on business has been felt across various sectors, including manufacturing, retail, and agriculture. The escalating cost of imports has led to reduced profit margins for companies, forcing them to make difficult decisions about pricing, production, and employment. This has resulted in a slowdown in economic growth, with the US GDP growth rate slowing to 2.1% in the second quarter of 2025, down from 3.4% in the same period last year. Stakeholder Perspectives: The impact of tariffs on businesses is not limited to their bottom line. The escalating costs have also put pressure on labor markets, with companies forced to reduce employment or implement cost-cutting measures to stay competitive. This has resulted in a decline in consumer spending, which accounts for over 70% of US GDP. Future Outlook: The future outlook for tariffs is uncertain, but one thing is clear: the current trajectory is unsustainable. Gapen warns that if corporations continue to absorb tariff costs, it will lead to reduced investment, lower productivity, and ultimately, slower economic growth. The administration's trade policies have been touted as a way to boost American industry, but so far, they have had the opposite effect. Next Steps: As the US economy continues to navigate the complexities of tariffs, businesses are left wondering what the future holds. Will the administration adjust its trade policies to alleviate the burden on corporations? Or will companies continue to absorb the costs, sacrificing profitability and competitiveness in the process? One thing is certain: the impact of tariffs will be felt for years to come. In conclusion, while Trump's tariffs have generated significant revenue for the US government, they have also imposed a substantial burden on businesses. As the economy continues to navigate this uncertain terrain, one thing is clear: the current trajectory is unsustainable and requires a rethink of the administration's trade policies. *Financial data compiled from Fortune reporting.*