Former President Donald Trump has proposed dramatically increasing tariffs on foreign imports, particularly on adversarial nations such as China, in a move that would potentially increase tariff rates to their highest levels in a century, according to an analysis from the Tax Foundation.
Trump has floated adopting an “all tariff policy” that would allow the federal government to end the income tax while using tariffs as an economic and foreign policy asset. The new plan would involve a universal tariff of 20%, as well as an added 60% tariff on imports from China, marking a tax policy that more closely resembles the policy environment at the turn of the century.
The analysis from the Tax Foundation concluded that the new estimated average tariff rate would rise to 17.7% after considering noncompliance and other factors, which is several times higher than the current 2.4% average tariff rate. The tariffs would create an estimated $368 billion in new tax revenue next year, which would fall to $269 billion after considering impacts to payroll taxes and income taxes, as well as decrease overall import levels into the United States.
Trump has cited tariff policy under President William McKinley as inspiration for his plan since the former commander-in-chief championed higher tariffs when he served as chairman of the House Ways and Means Committee. “In the 1890s, our country was probably the wealthiest it ever was because it was a system of tariffs,” Trump contended at one recent rally in Michigan.
The tariff proposals from Trump come after the Republican platform approved this year included language that commits the party to “support baseline tariffs on foreign-made goods, pass the Trump Reciprocal Trade Act, and respond to unfair trading practices.” The platform added that higher tariffs mean “taxes on American workers, families, and businesses can come down.”
Beyond the tariff proposal, Trump has suggested extending the Tax Cuts and Jobs Act, his signature legislative achievement during his first term in the White House, as well as lowering the corporate tax while exempting Social Security benefits and service tips from taxation.
The collective impact of the new Trump tax proposals would decrease federal tax revenue by $1.3 trillion over the next decade and long-run gross domestic product by 0.2% while increasing long-run wages by 0.6%, according to another analysis from the Tax Foundation.
The nonpartisan tax policy nonprofit also found that the collective proposals from Vice President Kamala Harris would increase federal tax revenue by $1.7 trillion over the next decade while reducing long-run gross domestic product by 2.0% and long-run wages by 1.2%.
