Tariff Revenues Should be Invested in Workers, Not Balance Sheets

As published in The Hill by Dr. Orit Frenkel

Over the past nine months, the Trump administration has imposed sweeping new tariffs on imports from most of the world. This includes key products, such as steel and aluminum. Starting next month, more tariffs are promised on semiconductors, pharmaceuticals, furniture, and other products.  

These measures have frayed our alliances, disrupted supply chains, and increased costs for U.S. firms and consumers. To be clear, these tariffs are effectively a tax increase for businesses and families. The Budget Lab at Yale estimates the 2025 tariffs will increase prices by 1.7 percent in the short run, the equivalent of an average per household income loss of $2,400 by year’s end.  

These tariffs have generated a windfall of new tax revenues that deserve deliberate and strategic use. To understand the scale, consider the following: before the 2025 tariff surge, the U.S. average effective tariff rate stood at 2.4 percent. Estimates are that by the end of September, consumers faced an average effective tariff rate of 17.9 percent, the highest since 1934. 

In September, the U.S. government collected $31.3 billion in tariff revenue, bringing the total for the year to $214.9 billion. For comparison, the U.S. collected $77 billion in tariff revenue during fiscal 2024. In other words: the government is now collecting tariff revenues at a pace far higher than at any point in recent memory. 

Even if the administration loses the Supreme Court case challenging their International Emergency Economic Powers Act or “national emergency” tariffs in November, the president has already announced a new list of trade cases that will likely impose new tariffs.  

These tariffs are hitting at a particularly vulnerable time. Unemployment is creeping up, in part because of the tariffs, but largely due to the growing impact of automation and other new technologies in the marketplace.  

Read the full paper here.