U.S. tariff revenue surges, but not enough to make up for tax cut leakage

The US tariff revenue in May increased nearly three times from the same period last year, reaching a record high of $24.2 billion. This is the result of Trump’s 10% tariff on the world for a whole month. Compared with April this year, it also increased by more than 25%. This shows that Trump’s trade war may significantly increase government revenue.

The average effective tariff rate in May rose to 8.8%, the highest since 1946; the average tariff rate on imported Chinese products reached a new high of 48%.

This data also shows that Trump’s tariffs have further distorted global trade flows. In May, the United States imported $19.3 billion from mainland China, a decrease of 21% from April and a sharp drop of 43% from May last year.

Since April 9 this year, the United States has imposed a 10% tariff on almost all imported products; although pharmaceuticals, semiconductors and other products have been temporarily exempted, they may face individual tariffs in the future; in addition, at the end of May, 50% and 25% tariffs were imposed on steel and automobiles respectively; steel tariffs were expanded to apply to freezers, dishwashers and washing machines.

Trump insists that tariff revenue can reduce the US government’s reliance on income tax. But in May, for example, tariff revenue accounted for only 7.7% of the federal deficit of $316 billion.

The Yale University Budget Lab estimates that if tariffs are not further increased from July 9, the effective tax rate will reach about 15%; Yale also predicts that based on the current tax rate, tariff revenue will increase by $2.2 trillion during the 2025-34 period; but due to other tax losses, net tax revenue will increase by $1.8 trillion; compared with the Congressional Budget Office’s estimate of the $3.4 trillion deficit added by tax cuts, there is still a considerable gap.