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President Trump has stated that the tariffs he is implementing could generate over $1 trillion for the government within the next year, which he believes would aid in decreasing the national debt and potentially allow for a reduction in income taxes. However, many economists are doubtful of these projections, suggesting that as prices rise due to tariffs, consumer spending on foreign products will likely taper off.
Typically, tariffs are levied as a percentage of the price that U.S. importers pay foreign sellers, and they are not directly paid by foreign nations. Instead, U.S. companies bear this cost, often passing it on to consumers through increased prices. “You’re going to see billions of dollars, even trillions of dollars coming into our country very soon in the form of tariffs,” Trump declared during a recent address.
While some economic analyses suggest that the revenue from Trump’s tariffs could significantly increase, the president’s estimates have been described as overly optimistic by various think tanks and even some officials within his own administration.
Potential Revenue from Auto Tariffs
At a recent press conference, White House staff secretary Will Sharf suggested that the proposed 25% tariff on imported vehicles and auto parts could yield “approximately $100 billion in new revenue.” Contrarily, President Trump later claimed that “anywhere from $600 billion to $1 trillion will be taken in over the relatively short-term period, meaning a year from now.”
The White House has not yet responded to requests for clarification regarding this disparity. A report from the Yale Budget Lab, an independent research organization, estimated that these auto tariffs could bring in around $600 billion to $650 billion over a decade—not in a single year, as suggested by the president. “On an annual basis, on average, that’s $60 to $65 billion. We’re not even close to trillions,” noted Ernie Tedeschi, director of economics at the Yale Budget Lab.
The same organization projects an average increase in motor vehicle prices by 13.5%, translating to an added cost of approximately $6,400 for a new car.
Estimated Revenue from Tariffs on Canada, Mexico, and China
In addition, the Yale Budget Lab found that Trump’s 25% tariff on imports from Canada and Mexico, set to take effect soon, along with the existing 20% tax on Chinese goods, might produce about $150 billion a year—equating to up to $1.5 trillion over a span of ten years. This raise in tariffs is projected to impact households, with potential losses in inflation-adjusted disposable income ranging from $1,600 to $2,000 annually.
Goldman Sachs has even suggested that Trump’s tariff increases could fetch around $300 billion per year. Any such figures would surpass the $88 billion in customs duties anticipated to be collected at U.S. ports in 2024. Nevertheless, many experts argue that there is a ceiling to the revenue that tariffs can generate, which is unlikely to reach $1 trillion annually.
The U.S. imported roughly $3.3 trillion worth of goods last year, according to the Bureau of Economic Analysis. The Peterson Institute for International Economics estimates that even under a hypothetical scenario where Trump implements a 50% tariff on all imports, it would yield a maximum of about $780 billion each year. “If you make something 50% more expensive, you don’t expect people to buy the same amount,” explained Kimberly Clausing, a senior fellow at the Peterson Institute.
Can Tariff Revenue Substitute for Income Taxes?
Trump has often suggested that the income generated from tariffs could be used to offset or even substitute income taxes. “Under the American first economic model, as tariffs on other countries go up, taxes on American workers and businesses will come down,” he mentioned in a recent address to the House GOP.
According to the Department of the Treasury, income taxes contribute over $2 trillion annually. Even if the president were to impose 50% tariffs on all imports, this would account for less than 40% of the revenue generated from income taxes, as noted by the Peterson Institute.
“The problem is it can’t raise anywhere near the amount of revenue you’d need to eliminate the income tax. That’s the crux of the issue,” stated Scott Lincicome, vice president for general economics and trade at the Cato Institute, a libertarian think tank.
Historically, tariffs have not served as a primary revenue source since the introduction of income taxes in 1913. In 2024, tariff revenues accounted for only 1.7% of over $4.9 trillion in total federal revenue. According to the Congressional Research Service, tariffs have consistently generated no more than 2% of federal revenue over the past seven decades.
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