Trump has said he could end income tax and replace it with tariffs

Trump Pushes Plan to Use Tariff Revenue for Tax Cuts, Facing GOP Resistance

U.S. President Donald Trump is advocating for a historic shift in tax policy, proposing to use revenue from higher tariffs on imported goods to help finance trillions of dollars in extended tax cuts. The move, which would mark an unprecedented shift in federal revenue strategy, is expected to face strong resistance from many Republicans in Congress.

Trump’s Plan: Tariffs as a Revenue Stream

Currently, the U.S. collects less than $100 billion annually from tariffs—trade penalties imposed on imports to protect domestic industries. Since tariffs make up only a small fraction of federal revenue, they are rarely a major factor in Washington’s budget battles.

However, Trump and his allies argue that tariffs should be treated similarly to personal and corporate taxes, allowing the government to raise duties on imports to help fund tax cuts and other government programs.

“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” Trump declared during his inaugural address on Monday.

“For this purpose, we are establishing the External Revenue Service to collect all tariffs, duties, and revenues. It will be massive amounts of money pouring into our treasury coming from foreign sources.”

Can Tariffs Raise Enough Money?

Despite Trump’s ambitions, tariffs have historically contributed only about 2% of total U.S. revenue, making it challenging to rely on them as a substantial funding source.

• Peter Navarro, a top Trump adviser, told CNBC that a 10% tariff could generate $350 to $400 billion in revenue, which he called a key bargaining chip in tax-cut negotiations.
• However, such an approach would mark a radical departure from traditional U.S. tax policy, which has relied primarily on income and corporate taxes.

GOP Lawmakers Skeptical of Trump’s Tariff Strategy

Many Republican lawmakers and trade analysts are doubtful that tariffs could provide a stable and sustainable revenue source.

• Rep. Ralph Norman (R-SC) said passing a tariff-based funding plan through Congress would be an uphill battle due to concerns about economic impacts on local businesses.

"Everybody's got their district and companies that are affected by tariffs, good and bad. I doubt he would think he could get it through," Norman told Reuters.

• Bobby Kogan, senior director of federal budget policy at the Center for American Progress, said:

"It is technically, mathematically possible to find some tariff policy that would offset the Trump tax cuts, but there is no way they would have the votes to do that."

Uncertainty Over Legislative Path

Republican leaders remain uncertain about how seriously Trump will pursue the plan.

• House Majority Leader Steve Scalise told Reuters:

"Trump's alluded to doing tariffs, but we don't know any details yet. He said expect something to come. But until we see it, it's really hard to speculate."

The White House has not yet responded to requests for comment.