Over the past few months, after President Trump imposed wave after wave of tariffs, companies began paying billions more to bring goods into the country. In May, the Treasury collected more than $22 billion in tariff payments, data released on Wednesday shows, a record high.
The income figures are among the first concrete indicators of the costs imposed by Mr. Trump’s trade policies. Although inflation data has yet to reflect price increases from tariffs, companies may soon pass at least part of those extra bills on to their customers. The rest could show up on their balance sheets in the form of narrower profit margins.
The president has made the case that tariffs can generate income for the government while encouraging manufacturers to build their products in America. But even May’s haul remains a tiny share of the federal government’s typical income. The vast majority comes from individual and corporate income taxes.
Nonetheless, House Republicans have argued that the tariff revenue will be enough to offset the projected losses from their huge tax and spending bill, which is currently being hashed out in the Senate.
A range of estimates suggests that is not likely to be the case.
Several major think tanks have modeled both the revenue that current tariffs would raise over the next 10 years and the impact on deficits if the House bill is passed, given that it would cut taxes by more than it would cut spending.
The models, produced by the University of Pennsylvania’s Wharton School, the Yale Budget Lab and the Tax Foundation, all use slightly different methodologies for measuring likely revenue impacts. They account for most of the economic effects of both policies — the House bill would raise overall economic growth slightly, for example, and the tariffs would prompt consumers to shift their buying.
They all find that U.S. coffers would sustain heavy losses until 2029, when many of the tax cuts in the House bill — including the elimination of taxes on tips and overtime, and expansions of the child tax credit and the standard deduction — would expire. At that point, tariffs would theoretically start to fully compensate for the cost of the bill. Here’s what it looks like in the conservative-leaning Tax Foundation’s estimates:
But there are some big caveats.
First, it’s politically difficult to let tax cuts expire, so there’s a strong possibility that they would be extended in 2029. That would substantially eat into those later revenue gains. (Much of this year’s legislation is dedicated to extending tax cuts that Republicans first passed in 2017.)
It’s also possible that judicial rulings would curtail Mr. Trump’s authority to impose tariffs, after a federal trade court ruled that those imposed on an emergency basis were illegal. In that case, it would be difficult to keep duties high enough to bring in hundreds of billions of dollars a year unless Congress imposed them legislatively. President Trump has also expressed a desire to strike deals with other countries that could lessen tariff revenue even if the courts don’t intervene, and a future president could get rid of them entirely.
Second, those near-term losses are potentially a big problem. The federal government’s debt is already extremely high relative to the size of the economy. It might make sense to cut taxes without fully offsetting them with spending cuts in order to bolster economic activity during a recession, but America isn’t in one. Serious trouble could arise in the next few years if deficits continue to mount and investors decide that America might not repay its debts. At the very least, more money sloshing around in the economy can raise prices.
“If we’re having very large increases in the deficit plus tariffs that can disrupt labor markets, that all points to expansionary policy, which means higher inflation,” said Erica York, who leads federal tax policy at the Tax Foundation. “You’re pushing your policy in the wrong direction for the moment that we’re in.”
And third: The House bill and current tariffs all hit poor Americans hardest. Tax cuts aimed at lower-income Americans would lapse in a few years under the legislation, while those that help businesses and wealthy people — through weakening the estate tax, for example — would be made permanent. The bill also cuts assistance to low-income people through Medicaid and food stamps. And tariffs raise prices on everyday essentials that low-income households already struggle to afford.
That’s why, even if tariffs mostly made up for the fiscal cost of the House bill, many Americans would be worse off.
“So it’s not just ‘what’s the net number for revenue,’” Ms. York said. “It’s ‘what are the actual policies doing for people,’ and this is not a good trade.’”
