In the early 20th century, before America had an income tax, tariffs paid many of the federal government's bills. At the time federal spending came to just 2% or so of GDP, largely confined to debt service, defence and infrastructure.
In 2024 just $100bn of the total $4.9trn that the federal government collected came from customs duties. America's personal-income tax brought in $2.4trn that year, a figure forecast to grow to $4.4trn over the next decade.
The Penn Wharton Budget Model estimates that the full suite of proposed tariffs, including the "reciprocal" levies currently on pause, would raise around $290bn a year over the next decade. The Budget Lab at Yale forecasts annual revenue of $180bn. The Tax Foundation puts the number closer to $140bn. All three estimates account for economic dynamics that reduce revenue, including weaker import demand, lower corporate-income- and payroll-tax receipts, retaliation and levy-dodging. Higher tariffs can reduce, rather than increase, revenue if they are on the wrong side of the peak of the "Laffer curve".
The Tax Foundation estimates that eliminating income taxes for people earning less than $200,000 would cost almost $740bn in 2025, or two to three times what tariffs could conceivably raise. A revenue-neutral swap could, in theory, cover those earning around $80,000 or less, who account for just 10% of total income-tax receipts.
In 2020 Mary Amiti of the Federal Reserve Bank of New York and colleagues found that nearly all of the tariffs in Trump's first term were ultimately borne by American companies, in the form of lower margins, and buyers, in the form of higher prices.
The tariffs in Trump's first term ultimately caused a net loss in American jobs. Duties on essential inputs, such as Canadian steel, drove up costs and weakened American competitiveness.
Is a person who blows up banks an econoclast?