Mainly Poor Countries Use Tariffs as a Major Source of Government Revenue

Chad P. Bown (PIIE) and Douglas A. Irwin (PIIE)
July 16, 2019

Mainly Poor Countries Use Tariffs as a Major Source of Government Revenue

President Trump has praised tariffs as a “great revenue producer for the US government.” But it is primarily poor countries that rely on taxes on imports to fund their governments. China raises only 2.3 percent of its revenue from tariffs. Tariffs are costly to administer and because they translate into higher prices, the tax burden falls harder on low-income consumers. The revenue they generate is insufficient to fund major expenditures like national defense, Medicare, and Social Security, which cost 20.8 percent of national income in 2018. Imports were only 12.5 percent of gross domestic product. 

This chart was adapted from Chad P. Bown and Douglas A. Irwin’s article, “Tariff revenue and Trump tweets — 5 things you need to know,” Washington Post MonkeyCage, July 16, 2019.