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Penn Wharton Analysis of Tariff Revenue

Effective Tariff Rates and Revenues

Please consider the Penn Wharton Effective Tariff Rates and Revenues projection as of September 10, 2025.

Key Points

• New tariffs have raised $80.3 billion in revenue between January 2025 and July 2025 before accounting for income and payroll tax offsets.
• The average effective tariff rate increased to 9.75 percent in July, up from 2.2 percent in January.
• Among major trading partners, China faces the highest tariffs, with effective rates reaching 40 percent in July.
• Steel and aluminum products are the most heavily tariffed product category at 41.2 percent, followed by automotive vehicles at 22.

Effective Tariff Rates on Product Categories

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The above chart is instructive. Steel and aluminum tariffs impact US manufacturers the most.

Those imports are intermediate goods used in manufacturing. It will be years, if ever, for this production to return to the US.

Effective Tariff Rates on Key Trading Partners

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Tariff Simulator by Year

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Please consider the Penn Wharton Revenue and Prices Tariff Simulator.

PWBM estimates that the Combined Trump Tariffs will generate $3.0 trillion in revenue over 10 years, using recent time-varying demand elasticity estimates. This corresponds to a reduction in imports by over 21% or $8.0 trillion due to higher prices on imported goods paid by US consumers and firms. If baseline import demand in the United States across all goods and services further stagnates over the next decade due to lower economic growth, total new tariff revenue will decrease to $2.7 trillion

Donald Trump Estimates

Donald Trump has repeatedly claimed that his proposed and implemented tariffs would generate massive revenue for the U.S. government, often framing them as a way to pay down the national debt, fund tax cuts, or even replace income taxes entirely. Based on his public statements, here are the key figures he has cited:

• Trillions of dollars over the next decade: Trump has stated that tariffs would raise “trillions” in revenue, aligning with his broader vision of using them to offset fiscal deficits and supercharge the economy. For instance, in August 2025, he claimed his tariffs had already “collected trillions in revenue,” though this appears to exaggerate short-term collections (actual 2025 tariff revenue through August was around $100–$150 billion, per Treasury data). Independent projections, such as those from the Congressional Budget Office (CBO), estimate that his full tariff regime could generate $2.5–$4 trillion over 10 years (2025–2034), which Trump has echoed as a realistic outcome in interviews.
• Hundreds of billions annually: In March 2025, Trump said tariffs would bring in “hundreds of billions of dollars,” adding that the U.S. would “become so rich you won’t know where to spend all that money.” This matches statements from his Treasury Secretary, Scott Bessent, who projected $300 billion per year starting in 2026.
• $50 billion per month (or $600 billion annually): Administration officials, including Trump, have cited expectations of $50 billion monthly from broad tariffs (e.g., 10–25% on most imports), which would total around $600 billion yearly. Trump referenced this in August 2025 discussions about using the funds to reduce debt “in very large quantity” and potentially issue “dividend” checks to Americans.
• $2 billion per day: In April 2025, Trump claimed tariffs were already generating $2 billion daily ($730 billion annually), but this was debunked as an exaggeration—actual daily averages at the time were closer to $192 million.

Trump’s rhetoric often emphasizes these figures without detailing economic trade-offs, such as higher consumer prices (estimated at $1,300–$1,700 per household annually by the Tax Foundation) or potential GDP reductions (up to 6–8% long-term, per Penn Wharton models). Actual 2025 collections have surged (e.g., 78% year-over-year to $68.9 billion in the first five months), but they remain a fraction of total federal revenue (about 2.7–5%) and far from replacing income taxes ($3.6+ trillion yearly).

The above from Grok AI.

Tax Foundation Estimates

Please consider the Tax Foundation report Tracking the Economic Impact of the Trump Trade War

Altogether, Trump’s imposed tariffs would raise $2.3 trillion in revenue over the next decade on a conventional basis ($1.5 trillion on a dynamic basis) and reduce US GDP by 0.9 percent, all before foreign retaliation.

However, if the IEEPA tariffs are permanently enjoined [blocked by the Supreme Court or Congress], it would reduce the total revenue raised by Trump’s tariffs on a conventional basis by $1.8 trillion to $573 billion over 10 years and reduce the negative GDP effect to 0.2 percent.

Committee for a Responsible Budget Estimates

Finally, please consider the August 2025 CRFB Budget Baseline

• Debt held by the public will rise from about 100 percent of Gross Domestic Product (GDP) ($30 trillion) today to 120 percent of GDP ($53 trillion) by 2035.
• Deficits will total $22.7 trillion (6.1 percent of GDP) over a decade and rise from $1.7 trillion (5.6 percent of GDP) in 2025 to $2.6 trillion (5.9 percent of GDP) in 2035.
• On August 22, CBO estimated recent tariffs would generate $4.0 trillion of total deficit reduction from 2025 through 2035 on a conventional basis, which is the equivalent to roughly $3.5 trillion from 2026 through 2035 on a dynamic basis. Incorporating these figures would slightly but not meaningfully reduce our deficit and debt projections.

Reducing the Debt

Trump proposes to use tariffs to reduce national debt and to give dividends to taxpayers.

The notion is mathematical idiocy because the US is running close to $2 trillion deficits annually.

Even factoring in huge tariff revenue, deficits are projected to be at least 1.5 trillion in all of the models.

Thoughts on the Models

One of the problems with all the model projections is they ignore the increasing chance that tariffs tip the economy into recession.

Recession or not, it is certain that tax hikes will slow the economy.

Tariffs are an extremely poor way to raise revenue. They hit consumers and small businesses the most.

To the extent tariffs are collected, they constitute a tax hike on US consumers and businesses.

It’s not just a matter of bragging about tariff revenue (sure to plunge when recession hits), but the dynamic impacts of tariffs will reduce growth and tax collection across the board.

The most amusing aspect of this is Republicans are now bragging about tax hikes and slower economic growth.

When the SHTF (Sh*t Hits the Fan), and that already seems to be happening, Trump will blame his mistakes on Fed and Biden.

Actual vs Predicted Consumer Sentiment Is a Big Hoot

Please see my September 8, 2025 post Actual vs Predicted Consumer Sentiment Is a Big Hoot

Economists think people should be happy. They aren’t.

Economists think people should be happier because like the Fed, they are clueless about inflation.

Real wages are down over the last four years no matter what the economists think and the BLS says.

And now tariffs are destroying jobs.

Related Posts

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The nonfarm payroll response rate is 42.6 percent with the same issues as with JOLTS

September 4, 2025: Year-Over-Year Small Business Employment Growth Barely Above Zero

ADP reports the total YOY small business growth as +19,000.

September 5, 2025: Jobs Report Misery: Only 22,000 Gain in August, June Revised to -13,000

August was a bad month for job seekers. Here are the grim details.

September 5, 2025: Since January 2023, BLS Jobs Revisions Were Negative 24 Out of 31 Times

Witness negative revisions 77 percent of the time, with more coming.

September 9, 2025: New QCEW Data Indicates More Big Negative Revisions Coming to Job Reports

The discrepancy between jobs reports and quarterly data widens again.

Regarding the asininity of steel and aluminum tariffs, please see Trump’s Aluminum Tariffs Seriously Backfire Already

Tariffs did not and will not bring production back to the US.

The economy is now cooling rapidly. And tariffs are part of the reason. Small businesses are going to get clobbered.

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