President Donald Trump has signed an executive order enforcing a universal 10% tariff on all imports and introducing reciprocal tariffs based on trading partners’ duties on American goods.
Under the new policy, the U.S. will impose tariffs at approximately half the rate that foreign countries apply to American exports. For example, if China levies a 67% tariff on U.S. goods, the U.S. will respond with a 34% tariff on Chinese imports. Additionally, Trump announced a blanket 25% tariff on all imported automobiles.
Speaking to reporters, Trump framed tariffs as a return to an era of economic strength:
“From 1789 to 1913, our economy was built on tariffs. The United States was at its wealthiest in proportion to the rest of the world. In fact, by the 1880s, we had so much revenue that a commission was formed just to decide how to manage the surplus.”
“Then, in 1913, for reasons no one can quite explain, they introduced the income tax, shifting the burden from foreign nations to American citizens,” Trump added.
Positioning tariffs as a form of economic nationalism, Trump hinted at reviving 19th-century fiscal policies by using trade revenue in place of income taxation.
Trump Proposes Replacing Income Tax with Tariff-Based Revenue
While campaigning in October 2024, Trump floated the idea of eliminating the Internal Revenue Service (IRS) and funding the federal government solely through tariffs.
According to accounting firm Dancing Numbers, this plan could result in lifetime tax savings of $134,809 to $325,561 per taxpayer. The higher end of that estimate assumes the removal of additional wage-based taxes at the state and local levels.
Commerce Secretary Howard Lutnick, who took office in February, has endorsed the proposal, suggesting a shift from the IRS to what he calls an “External Revenue Service.” Lutnick argued that the federal government has been unable to balance its budget while continuously increasing financial demands on citizens. He added that tariffs would bolster the U.S. economy and provide stronger protections for American workers.
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