Description
President Donald J. Trump's new tariffs could generate trillions of dollars in new federal government revenue over a decade, but the net gain would be reduced by the measures' damage to the US economy and other countries' likely retaliation. Because of uncertainty about which permanent tariff increases Trump might eventually implement, we modeled the effects of 10, 15, and 20 percentage point increases in tariffs on all goods imports.
We find these higher tariff rates generally produce more tariff revenue. But they also reduce other tax revenue from companies and households by hurting economic growth—resulting in lower GDP, investment, employment, and real wages than otherwise. The effects are amplified if other countries retaliate by imposing the same tariffs on imported US goods.
Indeed, with retaliation, a 20 percentage point rate increase yields a smaller gain in tariff revenue than the 15 percentage point increase because imports drop more, as does revenue from the other two sources. This produces a net revenue gain from all three sources of $791 billion over a decade, the smallest amount in the scenarios examined here.
This PIIE Chart is adapted from Warwick J. McKibbin and Geoffrey Shuetrim's PIIE Briefing, The US revenue implications of President Trump's 2025 tariffs.
