Tax Policy Center: Trump tariffs will cost American households nearly $3,000 more on average next year
The Tax Policy Center (TPC) estimates that if Trump's proposed 20% global tariff and 60% tariff on China are implemented, American households would face an average tax increase of nearly $3,000 next year, and imports would decrease by $9 trillion over the next decade. Additionally, a 200% tariff on Mexican cars would add about $600 more to household tax burdens. Trump's campaign team responded that high tariffs would encourage companies to relocate factories back to the U.S.
Key Points
- The Tax Policy Center (TPC) estimates that former President Trump's proposed 20% global tariff and 60% tariff on China would increase taxes on American households by nearly $3,000 on average next year and reduce imports by $9 trillion over the next decade.
- Another proposal to impose a 200% tariff on Mexican cars would add an average of about $600 more to household tax burdens. TPC is a joint think tank of the Urban Institute and the Brookings Institution.
- TPC noted: "Trump's tariffs could significantly raise prices of imported goods, as most of the costs would be passed on to U.S. consumers and businesses, thereby reducing inflation-adjusted domestic income and income tax revenue."
In-Depth Analysis
Last year, Trump announced that if re-elected, he would implement comprehensive import tariffs. Since then, multiple studies have shown that the benefits of such tariffs are far outweighed by the costs to American households, productivity, economic growth, fiscal health, and national security.
Trump's campaign team responded to these criticisms on Tuesday, pointing out that the Biden administration has not repealed most of Trump's tariffs and citing the former president's recent comments.
"There is no tariff problem at all," Trump said at the Economic Club of Chicago on October 15. "You just build your plant in the U.S., and you pay no tariffs."
He believes that comprehensive tariffs will create jobs and stimulate investment. "The higher the tariff, the more likely companies are to come to the U.S. to build plants, thereby avoiding paying tariffs."
TPC's estimates of the broad tariff impact do not account for retaliation by trading partners. TPC warned: "However, experience shows that these countries may impose tariffs on U.S. imports, reducing demand for U.S.-made products and leading to job losses for American workers."
TPC said that the 20% global tariff and 60% tariff on China would generate about $6 trillion in total revenue on top of the existing approximately $1 trillion in tariff revenue. But "given the decline in corporate and individual income tax revenue, the actual total revenue would be much lower, while domestic income expectations would also decrease."
Previous studies have also highlighted similar costs of comprehensive import tariffs. A study released by the American Action Forum (AAF) in June showed that if Trump's originally proposed 10% comprehensive tariff were implemented, the annual cost to American households would increase by $1,700 to $2,350, with median worker income losses of up to 3%.
AAF also noted that an additional 60% tariff on China would increase annual household costs by $1,950, raising total consumer costs from $300 billion to over $500 billion.
However, Trump disagrees with these analyses. "I believe in tariffs," he said in Chicago this month. "To me, the most beautiful word in the dictionary is 'tariff,' and it's my favorite word. It needs a PR team to help—but to me, it's your most beautiful word."