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Tariff Revenue and Leverage May Outlast Trump Presidency

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Tariff Revenue and Leverage May Outlast Trump Presidency

2026-07-25 07:48 UTCBy AlphaScala Research DeskSource reporting: thehindubusinessline.comEditorial standards

Tariff Revenue and Leverage May Outlast Trump Presidency

Trump's forced-labor tariffs raise $1.7 trillion over a decade and give presidents bargaining power. Economists say revenue and trade deals make full rollback unlikely even with voter anger.

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President Donald Trump's latest tariffs took effect Friday, imposing a 10% or 12.5% duty on imports from most trading partners over forced labor allegations several countries have called baseless.

The revenue and bargaining power these levies generate could make them hard for any future president to fully dismantle, economists and trade experts said.

Josh Lipsky, vice president and chair of international economics at the Atlantic Council, said the tariffs are part of broader trade deals and provide a revenue stream. "I do think in general tariffs are going to be more sticky than a lot of people believe," Lipsky said. "I think the pull of this will be hard to get away from."

The Tax Policy Center estimates the tariffs will raise about $1.7 trillion over the next decade, with $179 billion expected in 2026 alone. Treasury Secretary Scott Bessent has described this as the "melting ice cube" theory – revenue declines over time as buyers shift away from high-duty imports.

The forced-labor levies are unlikely to be rolled back soon, according to an official from a European Union member country who spoke on condition of anonymity. It is doubtful there will be a return to the lower duty levels that preceded Trump, the official said.

Former President Joe Biden maintained and in some cases expanded Trump's first-term tariffs on China. The pattern suggests a Democrat could smooth relations with allies and ease economic impact without throwing the tariffs out entirely, experts said.

Wendy Cutler, senior vice president at the Asia Society Policy Institute, said a new president wanting to work with foreign allies might be "more sympathetic to try to find exit ramps with our allies and partners." She noted the challenge is that "we're getting used to that revenue."

The current tariffs replace less than 60% of the revenue lost from the earlier "emergency" tariffs the Supreme Court struck down, according to the Committee for a Responsible Federal Budget. The administration is now in the process of refunding those duties.

Even when Trump acknowledges the tariffs do not work perfectly, he has offered tweaks rather than wholesale removal. On Monday, he signed a proclamation halving duties on some aluminum imports to address insufficient supply.

Legal challenges are underway. Small businesses filed lawsuits in the US Court of International Trade on Friday, accusing the administration of unlawfully using Section 301 of the Trade Act of 1974. Trade historian Douglas Irwin, a Dartmouth economics professor, told Bloomberg TV that Section 301 tariffs "are on stronger legal ground" despite the challenge. "It's not clear that the courts will overturn them, so these tariffs are probably here to stay for some time," Irwin said.

Heading into the midterm elections, tariffs are a major Democratic talking point as voters express anger over the cost of living. A YouGov survey of nearly 9,700 US adults this week found 72% believed the president's levies increased the prices they paid. Republicans are bracing for losses, defending their majorities in Congress.

Matt Bennett, co-founder of the moderate Democratic think tank Third Way, said a future Democratic president will face pressure to make changes. "Whoever will become president will have spent two years arguing that Trump has raised prices intentionally and that's going to be pretty hard to work back," Bennett said. There will be pressure to "lift a tariff and bring down prices."

The cost of living remains a key frustration. While June data showed consumer prices fell amid lower gasoline prices, the fuel cost has headed back up and inflation remains elevated.

Tariffs present a trade-off for the deficit. Revenue from the levies helped narrow the budget gap in 2025 and early 2026. The levies can also drag on economic growth, making it harder to reduce the deficit-to-GDP ratio.

The Atlantic Council's Lipsky said the tariffs are now embedded in the fiscal landscape. "The pull of this will be hard to get away from," he said.