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Why Trump‘s tariff proposals would harm working Americans
PIIE
2024.05.21
Presidential candidate Donald Trump is proposing to reduce US reliance on income taxes while increasing our reliance on import tariffs. He proposes extending expiring tax cuts from 2017 and has also suggested possible new rounds of tax cuts. At the same time, he has proposed a ten percent "across- the -board" tariff and a 60 percent or more tariff on imports from China. Together, these policy steps would amount to regressive tax cuts, only partially paid for by regressive tax increases. The tariffs would reduce after-tax incomes by 3.5 percent for those in the bottom half of the income distribution and cost a typical household in the middle of the income distribution about $1,700 in increased taxes each year. If executed, these steps would increase the distortions and burdens created by the rounds of tariffs levied during the first Trump administration (and sustained during the Biden administration), while inflicting massive collateral damage on the US economy.

This Policy Brief leverages recent research to provide approximate calculations for the cost of the higher proposed tariffs to US consumers, considering the distribution of these costs across US households and the consequences for US federal revenues. In sum, Trump‘s tax proposals entail sharply regressive tax policy changes, shifting tax burdens away from the well-off and toward lower-income members of society while harming US workers and industries, inviting retaliation from trading partners, and worsening international relations.