CPA estimates that a universal tariff would generate substantial federal revenue across multiple rate scenarios.
A 10 percent universal tariff would raise about $2.63 trillion over 10 years.
A 5 percent universal tariff would raise about $1.315 trillion over 10 years.
A 2.5 percent universal tariff would still raise about $658 billion over 10 years.
CBO projected that tariff increases implemented in 2025 would reduce primary deficits by $2.5 trillion over 11 years.
Recent inflation data indicate that tariffs are not the primary driver of household price pressure. Over the prior 12 months, commodities less food and energy commodities rose only 1.2 percent.
As the Congressional Budget Office (CBO) projects a $1.9 trillion federal deficit for fiscal year 2026 [1], Congress is under increasing pressure to identify durable budget pay-fors. In most cases, that discussion quickly narrows to three familiar choices: raise domestic taxes, cut spending, or continue borrowing more. But tariffs warrant more serious consideration. They are not only a trade policy tool; they are also a federal revenue instrument capable of generating substantial Treasury receipts while strengthening incentives for domestic production and more resilient supply chains.
Tariffs Have Already Raised Substantial Revenue
Recent CBO estimates show that tariffs are already producing meaningful revenue. In its November 2025 update, CBO projected that tariff increases implemented earlier that year would reduce primary deficits by $2.5 trillion over 11 years if maintained, along with another $0.5 trillion in reduced interest costs from lower federal borrowing, for a total deficit reduction of $3.0 trillion [2].
The next step is to expand and codify that revenue through a universal tariff framework. CPA’s modified GTAP-FP trade model projects that a universal revenue tariff would generate substantial federal receipts while also increasing domestic production, employment, and household income. Unlike the standard GTAP model, which assumes a fixed full-employment economy, CPA’s framework allows U.S. output to expand as demand shifts from imports to domestic goods and allows labor and capital to increase alongside that higher demand. These modifications are informed by observed U.S. experience following the 2018 and 2019 tariff actions. On that basis, Congress could consider three straightforward tariff scenarios.
Tariff Revenue Scenarios
A 10 percent universal tariff should be the central option under consideration. CPA estimates that it would raise approximately $263 billion annually, or about $2.63 trillion over 10 years. At that level, tariffs would function as a major statutory pay-for while also delivering the strongest incentive to reshore production and reduce import dependence.
A 5 percent universal tariff would remain a credible secondary option. Scaled from the same CPA estimate, it would generate about $131.5 billion annually and roughly $1.315 trillion over 10 years. Although less forceful than the 10 percent approach, it would still provide substantial revenue and a clear incentive to expand domestic production.
A 2.5 percent universal tariff would be the most limited of the three scenarios, but it would still generate substantial revenue—roughly $65.8 billion annually and about $658 billion over 10 years. Its effect on reshoring and sourcing decisions would be limited compared to the higher-rate options, but it would still provide Congress with a meaningful federal revenue stream and reinforce the case for tariffs as a permanent part of the budget toolkit.
All three universal tariff scenarios would generate substantial new federal revenue. Relative to CBO’s baseline customs duties projection, CPA’s modeling shows that a 10 percent universal tariff would raise total tariff revenue by about 65 percent, a 5 percent tariff would increase it by about 33 percent, and a 2.5 percent tariff would still lift revenue by roughly 16 percent over the projection period. Under the 10 percent scenario, tariff revenue would rise to roughly 34 percent above projected federal corporate income tax revenue, while even the 2.5 percent scenario would bring tariff revenue to roughly the same level as projected corporate tax revenue.
Tariffs Are a More Productive Revenue Source
These tariff scenarios would not only generate significant revenue; they would do so by taxing a less harmful base than the usual alternatives. Higher income taxes take more directly from Americans’ labor, savings, and entrepreneurship. Higher corporate taxes directly increase the cost of operating, investing, and producing in the United States. Spending cuts can often reduce domestic demand, public investment, or public support for American households. Tariffs, by contrast, raise revenue by taxing imported goods and foreign production, placing the burden on import dependence rather than on domestic work and output.
That distinction is economically important. Import dependence reflects offshoring, weaker manufacturing capacity, more fragile supply chains, and greater exposure to foreign shocks. Tariffs therefore raise revenue from import dependence that has consistently undermined American workers and producers, while also improving the relative position of U.S. firms. That gives tariffs a policy advantage over revenue options that draw resources directly out of the domestic economy.
Tariffs Are Not the Primary Driver of Inflation
The principal objection to tariffs as a revenue tool, however, is inflation. Critics argue that tariffs will translate into higher prices for American consumers. But recent inflation data indicate that tariffs are not the primary driver of household price pressure. In the Bureau of Labor Statistics’ March 2026 CPI release, commodities less food and energy inflation—the category most closely tied to tariff-sensitive consumer goods—rose only 1.2 percent over the prior 12 months [3]. By contrast, larger increases appeared in gasoline at 18.9 percent, electricity at 4.6 percent, utility gas service at 6.4 percent, shelter at 3.0 percent, and medical care services at 3.7 percent [3]. The main inflation pressures facing households remain concentrated in energy, housing, and services rather than the goods category most exposed to tariffs.
CPA’s tariff modeling results are also relevant here because tariffs do not operate merely as static price increases. Tariffs also directly incentivize domestic production, expand manufacturing employment, and raise income. CPA’s modified GTAP-FP model estimates that a 10 percent universal tariff would increase U.S. GDP by $728 billion, add 2.8 million jobs, and raise household income by 5.7 percent, or about $4,252 per household. Those gains in output, employment, and income more than offset any potential price effects associated with higher tariffs.
Conclusion
Tariffs should be treated as a serious pay-for option in any tax, budget, or reconciliation discussion. A 10 percent universal tariff would raise roughly $2.63 trillion over 10 years, with lower-rate options generating about $1.315 trillion from a 5 percent tariff and approximately $658 billion from a 2.5 percent tariff. These are significant revenue sums. More importantly, tariffs can raise substantial federal receipts while also supporting domestic production, reducing reliance on imports, and avoiding more harmful domestic tax increases or spending cuts. Congress should stop treating tariffs as an incidental byproduct of trade enforcement and start treating them as a core fiscal tool that strengthens production incentives and supports the rebuilding of the U.S. industrial base.
[2] Congressional Budget Office (CBO), Budgetary Effects of the Increase in Tariffs Implemented Between January 6 and May 13, 2025, November 12, 2025, https://www.cbo.gov/publication/61877.
[3] U.S. Bureau of Labor Statistics (BLS), Consumer Price Index – March 2026, April 10, 2026, https://www.bls.gov/news.release/cpi.nr0.htm.
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.
Tariffs as Budget Pay-Fors: Three Revenue Options for Congress
KEY POINTS
As the Congressional Budget Office (CBO) projects a $1.9 trillion federal deficit for fiscal year 2026 [1], Congress is under increasing pressure to identify durable budget pay-fors. In most cases, that discussion quickly narrows to three familiar choices: raise domestic taxes, cut spending, or continue borrowing more. But tariffs warrant more serious consideration. They are not only a trade policy tool; they are also a federal revenue instrument capable of generating substantial Treasury receipts while strengthening incentives for domestic production and more resilient supply chains.
Tariffs Have Already Raised Substantial Revenue
Recent CBO estimates show that tariffs are already producing meaningful revenue. In its November 2025 update, CBO projected that tariff increases implemented earlier that year would reduce primary deficits by $2.5 trillion over 11 years if maintained, along with another $0.5 trillion in reduced interest costs from lower federal borrowing, for a total deficit reduction of $3.0 trillion [2].
The next step is to expand and codify that revenue through a universal tariff framework. CPA’s modified GTAP-FP trade model projects that a universal revenue tariff would generate substantial federal receipts while also increasing domestic production, employment, and household income. Unlike the standard GTAP model, which assumes a fixed full-employment economy, CPA’s framework allows U.S. output to expand as demand shifts from imports to domestic goods and allows labor and capital to increase alongside that higher demand. These modifications are informed by observed U.S. experience following the 2018 and 2019 tariff actions. On that basis, Congress could consider three straightforward tariff scenarios.
Tariff Revenue Scenarios
A 10 percent universal tariff should be the central option under consideration. CPA estimates that it would raise approximately $263 billion annually, or about $2.63 trillion over 10 years. At that level, tariffs would function as a major statutory pay-for while also delivering the strongest incentive to reshore production and reduce import dependence.
A 5 percent universal tariff would remain a credible secondary option. Scaled from the same CPA estimate, it would generate about $131.5 billion annually and roughly $1.315 trillion over 10 years. Although less forceful than the 10 percent approach, it would still provide substantial revenue and a clear incentive to expand domestic production.
A 2.5 percent universal tariff would be the most limited of the three scenarios, but it would still generate substantial revenue—roughly $65.8 billion annually and about $658 billion over 10 years. Its effect on reshoring and sourcing decisions would be limited compared to the higher-rate options, but it would still provide Congress with a meaningful federal revenue stream and reinforce the case for tariffs as a permanent part of the budget toolkit.
All three universal tariff scenarios would generate substantial new federal revenue. Relative to CBO’s baseline customs duties projection, CPA’s modeling shows that a 10 percent universal tariff would raise total tariff revenue by about 65 percent, a 5 percent tariff would increase it by about 33 percent, and a 2.5 percent tariff would still lift revenue by roughly 16 percent over the projection period. Under the 10 percent scenario, tariff revenue would rise to roughly 34 percent above projected federal corporate income tax revenue, while even the 2.5 percent scenario would bring tariff revenue to roughly the same level as projected corporate tax revenue.
Tariffs Are a More Productive Revenue Source
These tariff scenarios would not only generate significant revenue; they would do so by taxing a less harmful base than the usual alternatives. Higher income taxes take more directly from Americans’ labor, savings, and entrepreneurship. Higher corporate taxes directly increase the cost of operating, investing, and producing in the United States. Spending cuts can often reduce domestic demand, public investment, or public support for American households. Tariffs, by contrast, raise revenue by taxing imported goods and foreign production, placing the burden on import dependence rather than on domestic work and output.
That distinction is economically important. Import dependence reflects offshoring, weaker manufacturing capacity, more fragile supply chains, and greater exposure to foreign shocks. Tariffs therefore raise revenue from import dependence that has consistently undermined American workers and producers, while also improving the relative position of U.S. firms. That gives tariffs a policy advantage over revenue options that draw resources directly out of the domestic economy.
Tariffs Are Not the Primary Driver of Inflation
The principal objection to tariffs as a revenue tool, however, is inflation. Critics argue that tariffs will translate into higher prices for American consumers. But recent inflation data indicate that tariffs are not the primary driver of household price pressure. In the Bureau of Labor Statistics’ March 2026 CPI release, commodities less food and energy inflation—the category most closely tied to tariff-sensitive consumer goods—rose only 1.2 percent over the prior 12 months [3]. By contrast, larger increases appeared in gasoline at 18.9 percent, electricity at 4.6 percent, utility gas service at 6.4 percent, shelter at 3.0 percent, and medical care services at 3.7 percent [3]. The main inflation pressures facing households remain concentrated in energy, housing, and services rather than the goods category most exposed to tariffs.
CPA’s tariff modeling results are also relevant here because tariffs do not operate merely as static price increases. Tariffs also directly incentivize domestic production, expand manufacturing employment, and raise income. CPA’s modified GTAP-FP model estimates that a 10 percent universal tariff would increase U.S. GDP by $728 billion, add 2.8 million jobs, and raise household income by 5.7 percent, or about $4,252 per household. Those gains in output, employment, and income more than offset any potential price effects associated with higher tariffs.
Conclusion
Tariffs should be treated as a serious pay-for option in any tax, budget, or reconciliation discussion. A 10 percent universal tariff would raise roughly $2.63 trillion over 10 years, with lower-rate options generating about $1.315 trillion from a 5 percent tariff and approximately $658 billion from a 2.5 percent tariff. These are significant revenue sums. More importantly, tariffs can raise substantial federal receipts while also supporting domestic production, reducing reliance on imports, and avoiding more harmful domestic tax increases or spending cuts. Congress should stop treating tariffs as an incidental byproduct of trade enforcement and start treating them as a core fiscal tool that strengthens production incentives and supports the rebuilding of the U.S. industrial base.
References
[1] Congressional Budget Office (CBO), Monthly Budget Review: March 2026, https://www.cbo.gov/topics/budget.
[2] Congressional Budget Office (CBO), Budgetary Effects of the Increase in Tariffs Implemented Between January 6 and May 13, 2025, November 12, 2025, https://www.cbo.gov/publication/61877.
[3] U.S. Bureau of Labor Statistics (BLS), Consumer Price Index – March 2026, April 10, 2026, https://www.bls.gov/news.release/cpi.nr0.htm.
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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