CBO projects that 2025 tariffs will reduce the U.S. budget deficit by $2.8 trillion over 10 years.
Tariffs will save $500 billion in interest payments by lowering federal borrowing needs.
Inflation will rise just 0.4 percentage points annually in 2025–2026, despite sweeping new tariffs.
$81.4 billion in tariff revenue has already been collected this fiscal year—more than all excise taxes combined—and up 65.1% from last year.
Tariffs are a more economically sound way to raise revenue—shifting the burden from American wages to foreign production.
The CBO’s Groundbreaking Findings
A newly released report from the Congressional Budget Office (CBO) has upended the way policymakers should think about tariffs. The CBO’s June 2025 report shows that tariffs are not only economic tools to protect industry and promote domestic investment—they are also powerful instruments of fiscal policy.
The analysis, which evaluates the wide range of tariff increases enacted between January and May 2025, finds that these trade measures would reduce the federal budget deficit by $2.8 trillion over the next decade, while also lowering debt service costs by another $500 billion.
At a time when Congress is gridlocked over tax hikes and spending cuts, these findings demand attention. Tariffs, properly structured, can shift the tax burden away from American workers and toward imports—placing the cost burden on foreign production—especially from countries that distort trade through subsidies or overcapacity rather than domestic labor. Tariff revenue can also support U.S. investments in domestic research and development as well as productive infrastructure and industrial investments.
Tariffs offer a rare convergence of economic, strategic, and fiscal benefits. And unlike income taxes, tariffs do not punish hard work, savings, or domestic manufacturing. They discourage offshoring, level the playing field for U.S. producers, and generate steady revenue for the Treasury.
Real Revenue, Right Now
The revenue gains from tariffs are not just theoretical. The U.S. Treasury’s Monthly Statements show the government has already collected $81.4 billion in net customs duties in fiscal year 2025 through May—more than it has collected from all federal alcohol and tobacco taxes combined. This revenue also represents a substantial jump from the previous fiscal year. FY2025 tariff revenue is up 65.1%, with revenue totaling just $49.3 billion during the same period last year, by comparison.
FIGURE 1:
These are not projections—this is hard, real-time cash already flowing into the Treasury, with more coming as full-year tariff effects continue to be realized. This proves that tariffs are not only economically and strategically sound—they’re a rising, stable, and underutilized revenue stream. In an era when increasing taxes on working families is economically regressive, tariffs provide a more just and productive alternative.
A Shift in Tax Burden
Tariffs offer a clear shift in the structure of taxation. Instead of taxing wages and production here at home, they tax the value of goods produced abroad and dumped into our markets, undermining American manufacturers. That’s a fairer model—one that rewards work and production, not outsourcing. For too long, the U.S. tax code has favored financial speculation, global arbitrage, and foreign sourcing. Income and payroll taxes punish the very people and businesses that sustain our economy. Tariffs reverse that trend by rewarding domestic production and discouraging offshoring.
Moreover, the revenues from tariffs can be strategically deployed to reduce those very tax burdens. Tariff revenue can be used to fund middle-class tax relief, invest in infrastructure and R&D, or reduce the national deficit—all without forcing austerity or triggering inflation.
For example, a 2024 CPA study found that just a 10% “universal” tariff on all U.S. imports would generate an estimated $263 billion in annual revenue. This could be used to provide a substantial $1,200 tax refund to lower-income households and refunds equal to 3% to 4% of income for middle-income households.
Big Gains, Modest Costs
Importantly, these revenue gains do not come at the cost of economic stability. The CBO estimates that the inflationary effect of the new tariff regime will be minimal—just 0.4 percentage points per year on average in 2025 and 2026. That is an extraordinarily low impact given the sweeping nature of the tariff increases.
The tariff measures included:
30% on imports from China and Hong Kong
25% on most automobiles
25% on most auto parts
25% on imported steel and aluminum
10% on nearly all other imported goods
25% on targeted imports from Canada and Mexico
This broad coverage—targeting both adversarial trade partners and countries benefiting from privileged access to the U.S. market—delivers serious revenue while putting minimal pressure on consumer prices. The inflation impact is significantly lower than recent shocks from energy, housing, or pandemic-era disruptions.
Moreover, CPA analysis shows that tariffs increase domestic production by replacing imports hit by tariffs, boosting real wages here in the U.S. In our 10% universal tariff model, real household incomes rise by 5.7%—equivalent to $4,252 per year—making workers much better off and more than offsetting the CBO’s small (0.4%), initial price impact.
A Path Forward for Congress
The CBO’s new analysis should serve as a wake-up call for Congress: tariffs are not just trade tools—they are a fiscally sound alternative to the endless cycle of taxing American work and borrowing against our future. With $2.8 trillion in projected deficit reduction, $500 billion in interest savings, and substantial real-time revenue already flowing into the Treasury, tariffs offer a powerful, inflation-resistant way to fund national priorities without expanding the tax burden on middle- and working-class Americans.
Tariffs shift the weight of government funding off domestic workers and producers and onto foreign imports—especially from countries that subsidize their industries and benefit from privileged access to the U.S. market. And tariffs do more than defend domestic industry—they generate durable fiscal benefits that can reduce deficits, enable broad-based tax relief, or fund targeted infrastructure investment. But to preserve these gains, Congress must act.
Recent legal challenges to tariff actions imposed under the International Emergency Economic Powers Act (IEEPA) reveal the risks of relying solely on executive authority. To ensure long-term continuity and predictability, Congress should establish a permanent, statutory framework for revenue-generating tariffs. Codifying these tools in statute will ensure long-term certainty for federal budgeting and confidence for U.S. producers
Washington must decide: continue taxing American labor and production, or shift the burden to foreign competitors exploiting our open market. The CBO’s findings are clear—tariffs can reduce deficits, fund tax relief for working Americans, and strengthen U.S. industry with minimal inflationary impact. This isn’t about expanding government—it’s about restoring balance and making foreign producers—not American workers—pay their share.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
CBO: Tariffs Bring Billions in Revenue, Barely Touch Inflation
KEY POINTS
The CBO’s Groundbreaking Findings
A newly released report from the Congressional Budget Office (CBO) has upended the way policymakers should think about tariffs. The CBO’s June 2025 report shows that tariffs are not only economic tools to protect industry and promote domestic investment—they are also powerful instruments of fiscal policy.
The analysis, which evaluates the wide range of tariff increases enacted between January and May 2025, finds that these trade measures would reduce the federal budget deficit by $2.8 trillion over the next decade, while also lowering debt service costs by another $500 billion.
At a time when Congress is gridlocked over tax hikes and spending cuts, these findings demand attention. Tariffs, properly structured, can shift the tax burden away from American workers and toward imports—placing the cost burden on foreign production—especially from countries that distort trade through subsidies or overcapacity rather than domestic labor. Tariff revenue can also support U.S. investments in domestic research and development as well as productive infrastructure and industrial investments.
Tariffs offer a rare convergence of economic, strategic, and fiscal benefits. And unlike income taxes, tariffs do not punish hard work, savings, or domestic manufacturing. They discourage offshoring, level the playing field for U.S. producers, and generate steady revenue for the Treasury.
Real Revenue, Right Now
The revenue gains from tariffs are not just theoretical. The U.S. Treasury’s Monthly Statements show the government has already collected $81.4 billion in net customs duties in fiscal year 2025 through May—more than it has collected from all federal alcohol and tobacco taxes combined. This revenue also represents a substantial jump from the previous fiscal year. FY2025 tariff revenue is up 65.1%, with revenue totaling just $49.3 billion during the same period last year, by comparison.
FIGURE 1:
These are not projections—this is hard, real-time cash already flowing into the Treasury, with more coming as full-year tariff effects continue to be realized. This proves that tariffs are not only economically and strategically sound—they’re a rising, stable, and underutilized revenue stream. In an era when increasing taxes on working families is economically regressive, tariffs provide a more just and productive alternative.
A Shift in Tax Burden
Tariffs offer a clear shift in the structure of taxation. Instead of taxing wages and production here at home, they tax the value of goods produced abroad and dumped into our markets, undermining American manufacturers. That’s a fairer model—one that rewards work and production, not outsourcing. For too long, the U.S. tax code has favored financial speculation, global arbitrage, and foreign sourcing. Income and payroll taxes punish the very people and businesses that sustain our economy. Tariffs reverse that trend by rewarding domestic production and discouraging offshoring.
Moreover, the revenues from tariffs can be strategically deployed to reduce those very tax burdens. Tariff revenue can be used to fund middle-class tax relief, invest in infrastructure and R&D, or reduce the national deficit—all without forcing austerity or triggering inflation.
For example, a 2024 CPA study found that just a 10% “universal” tariff on all U.S. imports would generate an estimated $263 billion in annual revenue. This could be used to provide a substantial $1,200 tax refund to lower-income households and refunds equal to 3% to 4% of income for middle-income households.
Big Gains, Modest Costs
Importantly, these revenue gains do not come at the cost of economic stability. The CBO estimates that the inflationary effect of the new tariff regime will be minimal—just 0.4 percentage points per year on average in 2025 and 2026. That is an extraordinarily low impact given the sweeping nature of the tariff increases.
The tariff measures included:
This broad coverage—targeting both adversarial trade partners and countries benefiting from privileged access to the U.S. market—delivers serious revenue while putting minimal pressure on consumer prices. The inflation impact is significantly lower than recent shocks from energy, housing, or pandemic-era disruptions.
Moreover, CPA analysis shows that tariffs increase domestic production by replacing imports hit by tariffs, boosting real wages here in the U.S. In our 10% universal tariff model, real household incomes rise by 5.7%—equivalent to $4,252 per year—making workers much better off and more than offsetting the CBO’s small (0.4%), initial price impact.
A Path Forward for Congress
The CBO’s new analysis should serve as a wake-up call for Congress: tariffs are not just trade tools—they are a fiscally sound alternative to the endless cycle of taxing American work and borrowing against our future. With $2.8 trillion in projected deficit reduction, $500 billion in interest savings, and substantial real-time revenue already flowing into the Treasury, tariffs offer a powerful, inflation-resistant way to fund national priorities without expanding the tax burden on middle- and working-class Americans.
Tariffs shift the weight of government funding off domestic workers and producers and onto foreign imports—especially from countries that subsidize their industries and benefit from privileged access to the U.S. market. And tariffs do more than defend domestic industry—they generate durable fiscal benefits that can reduce deficits, enable broad-based tax relief, or fund targeted infrastructure investment. But to preserve these gains, Congress must act.
Recent legal challenges to tariff actions imposed under the International Emergency Economic Powers Act (IEEPA) reveal the risks of relying solely on executive authority. To ensure long-term continuity and predictability, Congress should establish a permanent, statutory framework for revenue-generating tariffs. Codifying these tools in statute will ensure long-term certainty for federal budgeting and confidence for U.S. producers
Washington must decide: continue taxing American labor and production, or shift the burden to foreign competitors exploiting our open market. The CBO’s findings are clear—tariffs can reduce deficits, fund tax relief for working Americans, and strengthen U.S. industry with minimal inflationary impact. This isn’t about expanding government—it’s about restoring balance and making foreign producers—not American workers—pay their share.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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