Trump floats tariffs as income tax replacement amid economic skepticism

[UNITED STATES] As tariff negotiations continue and investors grapple with uncertainty, former President Donald Trump remains steadfast in his support for broad tariffs — even proposing they could one day replace federal income taxes.

In an April 15 interview with Fox News, Trump floated the idea that tariff revenue might be substantial enough to supplant income taxes altogether. “There is a chance that the money from tariffs could be so great that it would replace” the income tax, he said.

The concept is not entirely new. Trump first introduced the idea during his 2024 campaign, raising it in a June meeting with Republican lawmakers. Any substantial change to the federal tax structure, however, would require congressional approval.

Trump’s remarks come as the federal deficit continues to widen. The Congressional Budget Office projects a $1.6 trillion shortfall for fiscal year 2025. While tariffs have long served as instruments of trade policy, relying on them as a core revenue source would represent a major departure from traditional fiscal strategy — and one that many economists view with skepticism.

“It’s not a realistic proposal,” said Alex Durante, a senior economist at the Tax Foundation, in an interview. Tariff policy remains in flux, with the Trump administration implementing a 90-day pause in early April on newly imposed duties. The current universal tariff on imports from most countries stands at 10%, while goods from China face tariffs as high as 145%.

The administration’s aggressive tariff approach has prompted retaliatory moves from global partners, including the European Union and China. In a recent escalation, Beijing imposed new tariffs on U.S. agricultural exports, intensifying fears of a protracted trade war that could reduce the volume of taxable imports and undermine revenue forecasts.

Economists and policy experts have questioned whether tariffs could generate revenue on par with income taxes. “The tariff tax base is a lot smaller than the income tax base,” said Kimberly Clausing, a senior fellow at the Peterson Institute for International Economics.

According to a report co-authored by Clausing, the U.S. imported $3.1 trillion worth of goods in 2023. In contrast, more than $20 trillion in income was subject to federal tax that year.

Beyond revenue concerns, economists warn that higher tariffs would likely increase consumer prices. A recent Federal Reserve Bank of New York analysis estimated that existing tariffs have already cost U.S. households an average of $1,200 per year. If expanded, the burden on consumers could outweigh any gains in government revenue.

Despite that, White House trade advisor Peter Navarro has claimed tariffs could generate as much as $600 billion annually. But many economists find that estimate overly optimistic. “That figure is not even in the realm of possibility,” said Mark Zandi, chief economist at Moody’s. “If you get to $100 billion to $200 billion, you’ll be pretty lucky.”

For perspective, the IRS had collected $1.14 trillion in individual income taxes for the 2025 fiscal year as of March 31, according to Treasury Department data. Clausing, in the Peterson Institute report, noted that “tariff rates would have to be implausibly high on such a small base of imports to replace the income tax.” She added in an interview that higher tariffs discourage imports — the very source of the proposed revenue.

The Trump administration declined to comment when contacted. Experts also caution that increased tariffs don’t automatically translate into higher revenues. “The administration seems to think that every time it raises the tariff rate that it can collect more revenue,” said the Tax Foundation’s Durante. “And that’s not always the case.”

A Tax Foundation report released April 15 estimates that a 10% universal tariff could bring in $2.2 trillion over a decade. However, it would also shrink the U.S. GDP by 0.4%, potentially reducing overall tax revenue. Reflecting global concern, the International Monetary Fund on Tuesday lowered its 2025 growth forecast for the U.S. from 2.7% to 1.8%, citing heightened trade tensions.