Over ten years, President Trump’s new 2025 tariffs could bring in trillions of dollars in new federal government revenue, but the negative impact on the US economy and the inevitable response from other economies would offset the net gain.
This PIIE Briefing evaluates the impact of 10, 15, or 20 percentage point increases in US tariffs on all imported commodities using a global economic model.
Depending on whether other economies impose the same taxes on US imports in retaliation, the authors assess how the impacts would vary.
This report is first published by PIIE and available to the reader at their website at piie.com/publications. Read the full report here.
Here is what this PIIE report predicts for the 10 year in future for the US:
15 % point increase: 15 percentage point increase in universal US tariffs would generate $3.9 trillion in federal government revenue over a decade (2025-34) before accounting for its impact on the US economy and assuming no foreign retaliation.
Offset affects of 15% point increase: That total would be partially offset by lower tax revenue than otherwise from households and companies due to the tariffs’ economic impacts—including slower US growth and lower production, employment, and real wages.
Overall 15% increase impact: After accounting for those offsets, the net revenue gain would be $3.2 trillion over a decade. That net revenue gain would shrink further to $1.5 trillion if other economies retaliate.
A lower 10% increase: A lower 10 percentage point tariff increase, combined with the economic effects and foreign retaliation, would generate a net revenue gain of $1.6 trillion. Higher tariffs do not necessarily yield more revenue.
A higher 20% increase: The net gain would be lowest, $791 billion, under a 20 percentage point tariff increase, combined with the economic effects and foreign retaliation.
Net outcomes of the findings
Under each of these three tariff rate scenarios, the United States would see lower GDP, investment, employment, and real wages over the following decade than otherwise—i.e., than without the tariff increases—and higher inflation over the initial two years.
The US sectors hit hardest would be agriculture, mining, and manufacturing because of their relatively high reliance on foreign demand for their exports. The harm would be amplified by retaliation from trading partners.