Introduce a 10 Percent Universal Tariff

Tariffs are taxes imposed on imported goods. As tariffs increase the price of foreign-produced goods, they incentivize buyers to switch to domestically produced goods and provide domestic producers room to increase their prices. Tariffs benefit domestic producers who receive higher prices and sales, but tariffs impose costs on foreign producers as well as other businesses and workers in the domestic economy.

This option applies a 10 percent universal tariff to all US goods imports in addition to sector- and country-specific Section 232 and Section 301 tariffs in effect as of April 2026. A universal tariff would affect both consumer goods and capital goods. In 2025, the United States imported $3.3 trillion of general merchandise goods, more than half of which were industrial materials or capital goods like machinery.

In addition to burdening labor like other excise taxes, applying tariffs to capital goods would increase the cost of capital, reducing overall incentives to invest in the United States and shrinking the capital stock, productivity, wages, and output. These estimates only capture the effect of tariffs reducing after-tax returns to labor, likely understating the economic effect on investment and the capital stock. Tariffs may also invite foreign retaliation, whether tariff or non-tariff barriers on US exports, which further reduce US output but generate no additional revenue for the US Treasury. These estimates assume no foreign retaliation.

On a conventional basis, this option would decrease the primary deficit by $1,996.2 billion over the budget window. Long-run GDP would fall by 0.4 percent, while long-run GNP would fall by 0.2 percent. On a dynamic basis, the primary deficit would decrease by $1,522.6 billion from 2027 through 2036, $473.6 billion less than the conventional estimate. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be lower than baseline, reaching 164.5 percent by 2056.

On average, in 2036, taxpayers would see decreases in their after-tax incomes of 1.0 percent on a conventional basis, rising to 1.3 percent in the long run on a dynamic basis. The top 1 percent of taxpayers would see a slightly smaller decrease.