Tariffs as a New Revenue Stream
Authors & Contributors
According to Treasury Secretary Scott Bessent, customs duty revenues could reach $300 billion by year-end if the current tariff policies remain in place.
Under the Trump Administration’s expansive tariff policy, the federal government has tapped a significant new revenue stream. Through August year-to-date, $144 billion in customs duties have flowed into the Treasury, with monthly collections averaging $25 billion since the April “Liberation Day” announcement.
Treasury Secretary Scott Bessent projects that customs duty revenues could reach $300 billion by year-end if current tariffs remain in place. Meanwhile, the Congressional Budget Office (CBO) estimates that tariffs could generate $2.8 trillion over the next decade, marking a notable shift in how the federal government is funded.
Still, individual income taxes remain the dominant source of federal revenue, totaling $2.4 trillion out of the $4.7 trillion collected fiscal year-to-date. When viewed alongside income tax changes introduced in the One Big Beautiful Bill Act (OBBBA), policies suggest some of the tax burden is shifting from earnings (income tax) toward consumption (tariffs).
Federal Government Budget, Receipts, Other "Customs Duties, Total”
While tariffs increase costs in the short term, they align with the Administration’s broader industrial strategy: reshoring production and reducing reliance on foreign supply chains. Tariffs are framed not just as a revenue tool, but as a lever to strengthen domestic manufacturing and national resilience. If successful, this strategy could shift the US economy away from import-heavy consumption and toward investment in domestic production.
Importantly, historically high corporate profit margins suggest firms have room to absorb some of these costs without fully passing them on to consumers. So far, consumers have borne about 30% of the tariff burden, with the rest absorbed by firms. Many companies built up inventories earlier in the year, allowing them to delay price increases. Another surprise is that foreign exporters have absorbed virtually none of the tariff costs, according to import price data. We believe this is temporary and that more inflation passthrough is likely in the months ahead.
As for the inflationary impact, a broad tariff package consistent with the Administration’s announcements could add about one percentage point to inflation within a year, primarily as a one-time upward shift in the price level. However, if firms and workers begin to embed these higher costs into their expectations, the inflationary effects could become more persistent—potentially prompting the Federal Reserve (Fed) to reassess its monetary policy stance.
Tariffs are inherently regressive, disproportionately affecting lower-income households that spend a larger share of their income on goods. If tariffs succeed in structurally reducing imports, customs revenue may eventually decline. Once embedded in the revenue mix, tariffs may be politically difficult to unwind, especially in an era of high government debt.
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