President Donald Trump’s new tariffs are unlikely to provide a steady stream of federal revenue to offset the 10-year cost of the “One Big Beautiful Bill”. There are several reasons for this.
Firstly, tariffs implemented via executive action can be easily reversed by future presidents. For example, President Joe Biden repealed some of the tariffs imposed by President Trump during his first term. If a court rules against the administration in one of the several pending lawsuits over the tariffs’ legality, it could lead to trillions of dollars less in revenue.
Secondly, the largest tariffs were imposed under dubious legal grounds, which means an adverse court ruling could result in significant losses. The uncertainty surrounding these tariffs will discourage investment and economic growth.
Thirdly, Trump is likely to change the scope and application of the tariffs as he has done in previous trade deals. This means they cannot be relied upon as a steady source of government revenue.
Furthermore, the administration may exclude certain products from the tariffs, similar to what was done for goods under the US-Mexico-Canada Agreement and consumer electronics. This will further reduce the overall impact of the tariffs.
Most economists agree that the tariffs will actually decrease economic growth, which would offset much or all of the increase in GDP caused by the tax cuts in the “One Big Beautiful Bill”. The implementation of tariffs can lead to private parties reducing or evading these taxes by changing their supply chains or exploiting loopholes.
In light of this, Congress should focus on closing loopholes and cutting federal spending rather than relying on tariffs. Experts have proposed several ideas for tax reform, but none involve tariffs.
Source: https://www.cato.org/blog/dont-count-tariff-revenue-cover-one-big-beautiful-bill