Will higher import tariffs meaningfully increase fiscal revenue?
Estimates of the latter will vary depending on the moderation in import volume factored in, apart from the various tariff rates and exemptions. The estimate is of significance, given the stretched federal fiscal context. We looked at the April revenue for early signs. It increased to USD 17.4bn, from USD 9.6bn in March and 125% y/y.
Is this good enough?
While this seems like a material jump, the 2025 revenue estimate based on a similar year-on-year number (say even higher at 150% y/y) is USD 246bn, after USD 98bn in 2024. This implies an increase of USD 148bn y/y, ~0.5% of GDP. One, this is lower than the numbers suggested by the current administration. Two, there could have been some frontloading of imports in April after the 90-day pause on reciprocal tariffs. Three, if the exemptions granted continue and/or tariff rates are lowered, the increase in revenue could be lower. Four, if the revenue collected is spent to support parts of the economy impacted by tariffs (say support for farmers or tax cuts), the net positive fiscal impact will be lower. Five, there could be a negative fiscal impact from any moderation in growth due to tariff passthrough and uncertainty.
The intention to lower imports (the target) and higher tariffs (the tool) will have some offset. For e.g., if imports do ease, tariff revenue collected will be lower. Overall, the fiscal impact of tariffs could be limited.
Source for the chart: U.S. Department of the Treasury, Bandhan MF Research
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