President Trump says tariffs could replace income tax
The US President asserted that his trade policy could generate billions of dollars in revenue.
According to RT, US President Donald Trump recently announced that revenue from tariffs he calls “Liberation Day” could replace federal income tax.
This month, Mr. Trump announced “reciprocal” tariffs on nearly 90 countries, citing what he called unfair trade practices. After global markets were shaken, he announced a 90-day moratorium on those tariffs and lowered the base rate to 10%. China was one of the few exceptions, with tariffs on its goods also being increased.
In an interview with Fox News' Rachel Campos-Duffy on April 15, Mr. Trump was asked whether revenue from tariffs could replace income taxes.
He praised the question, noting that the TV host was the only person who had ever posed it to him – despite his frequent contact with “top financial minds,” no one had ever brought it up.
“It’s possible that the revenue from tariffs would be so large that it could replace — in the old days, from about 1870 to 1913, tariffs were the only source of government revenue,” Trump said, referring to the Gilded Age — a period that saw rapid industrial growth and rising national wealth, but also deep income inequality and widespread poverty.
“That was the time when our country was relatively the richest. We were the richest country,” he added to MC.
Mr Trump, who has called himself a “tariff man”, has argued that his trade policies could bring in more than $1 trillion next year – helping reduce the national debt and perhaps even offset or replace income taxes. He has claimed that tariffs are strengthening the US economy, bringing “billions of dollars a day” into the federal treasury.
Economists, however, are skeptical that tariffs can generate revenue on the scale Mr Trump claims, warning that higher import prices could depress consumer spending and weaken overall demand.
According to the Congressional Research Service, over the past 70 years, tariffs have accounted for less than 2% of total annual federal revenue. In 2024 alone, US import tax revenue will account for just 1.7% of the more than $4.9 trillion in federal revenue.
Broad tariffs on trading partners — especially China — could benefit the U.S. economy and American workers in the long run, financial analysts at ING said on April 15. But they warned that the transition could be “very challenging and potentially economically damaging” in the short term.
If trade deals are signed and tariffs are scaled back, ING notes that the US government could lose fiscal space to implement broader tax cuts.
