The American government hopes to collect $300 billion in revenue this year from Donald Trump’s tariff war. However, the higher prices resulting from the increase in tariffs from imported goods could set back US households’ incomes by an even greater amount.
Tuesday, Treasury Secretary Scott Bessent said the US, so far in 2025, had garnered around $100 billion in tariff income, which could triple to $300 billion by the end of the year. And while Trump claims the tariffs “will start being paid” from August 1 by the countries they are imposed on, the loss of income for American households from higher prices will exceed the government’s revenues on account of the higher duties on foreign goods.
According to non-partisan policy research centre The Budget Lab at Yale, all tariffs levied up to July 9 in 2025 — assuming they stay in force in perpetuity — will lead to a 1.8 per cent increase in prices in the short-run, which is equivalent to an annual income loss of $2,367 for each household, on average.
With the Census Bureau estimating the number of US households at just over 127 million, this results in a total income loss of $302 billion for American households this year.
The Budget Lab’s calculations assume the US Federal Reserve does not react to the tariffs, which are estimated to bring down GDP growth in 2025 by 70 basis points (bps) and 40 bps in the long run — equivalent to an annual GDP loss of $110 billion in 2024 prices. Meanwhile, the unemployment rate is seen rising 40 bps by the end of 2025.
To be sure, the gains for the US government from the tariffs could end up being higher than just $300 billion considering the reciprocal tariffs were suspended for 90 days as various countries negotiated trade deals with the Trump administration.
According to the Budget Lab, the tariffs levied so far in 2025 could raise the government’s revenue by a net $2.2 trillion over 2026-35. This is lower than the US Congressional Budget Office’s own estimate of tariff income of about $2.8 trillion over 10 years, which Bessant said this week was “probably low.”
Small beginnings to tariffs
Starting July 7, Trump has sent ‘letters’ to 22 countries informing them of the tariff that would apply to goods imported into the US from their shores starting August 1. This interim pause until next month, according to ANZ Asia Economist Krystal Tan, “appears to be a calculated negotiation tactic – designed to increase the pressure on trading partners to accelerate talks and offer deeper concessions”.
However, the list is littered with names that the US stands little to gain from. Of the 22 countries on whom the US has levied tariffs as of July 9, eight – Laos, Myanmar, Serbia, Bosnia & Herzegovina, Libya, Tunisia, Brunei, and Moldova – enjoyed a goods trade surplus of less than $1 billion in 2024. In fact, these eight countries’ goods trade surplus with the US in 2024 was a mere $3.79 billion, up from $3.11 billion in 2023.
And yet, these countries have been slapped with tariffs ranging from 40 per cent – Laos and Myanmar, who had a goods trade surplus of $763 million and $577 million, respectively, with the US in 2024 – to 25 per cent. Moldova, which faces a tariff of 25 per cent, had a goods trade surplus of just $85 million with the US last year. All these rates are in addition to any sector-specific tariffs.
Then there is Brazil, which has attracted the highest tariff rate of 50 per cent for non-trade reasons, with Trump complaining in his letter to President Luiz Inácio Lula da Silva that the treatment of his predecessor Jair Bolsonaro – who is on trial for his alleged coup attempt following a loss to Lula in the 2022 elections – was a “disgrace” and a “witch hunt”. The US, ironically, enjoyed a goods trade surplus of almost $7 billion with Brazil in 2024.
On the whole, the 22 countries to have received Trump’s letters so far had a combined goods trade surplus of $264 billion in 2024, up 8 per cent from 2023. However, this year-on-year increase hides a few key points. One, the US’ surplus or deficit with nine of these countries – Brazil, Myanmar, Bosnia & Herzegovina, Iraq, Libya, Algeria, Japan, Malaysia, and Brunei – had improved in 2024 from 2023. In fact, the increase in the deficit last year was due to just two countries – South Korea and Thailand – both of whom face a 25 per cent tariff. Both are also key trade partners for the US.
“It is undoubtedly interesting that Trump is targeting South Korea and Japan, the two most important allies in Asia. Whether this will help to build a united front with these countries against their major global rival, China, remains to be seen,” Commerzbank economists Bernd Weidensteiner and Christoph Balz said in a note on July 8.
President Donald Trump unveiling his first trance of tariffs on April 2. (Photo: AP) 
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