The Trump administration has stepped up efforts to recover about $1.6 trillion in lost tariff revenue after the Supreme Court struck down a set of import duties imposed by the president, with officials turning to new investigations and legal rulings to impose replacement duties, according to an AP report.Recovering the revenue — which the White House relied on to offset the cost of trillions of dollars in tax cuts — will be difficult, experts say, because alternative tariff methods involve longer, more complex processes and allow U.S. companies to seek exemptions. It may take months before the impact of the new measures on revenue becomes clear.“I wouldn’t bet against this administration being able to return on paper to the same effective tariff rate that it was before,” said Elena Patel, co-director of the Tax Policy Center at Brookings Urban.
But the revised strategy “will make it easier for people to object to the tariffs, which will put a big asterisk on revenues until all of this is sorted out.”US Trade Representative Jamison Greer said the administration would investigate 16 economies – including the European Union – on whether government subsidies encourage excessive factory capacity that hurts manufacturing in the United States. The probe will also include China, South Korea and Japan.
A second investigation will examine dozens of countries on whether their failure to ban goods made with forced labor constitutes an unfair trade practice that harms the United States. This review will cover the European Union and China, as well as Mexico, Canada, Australia and Brazil.Both investigations are being conducted under Section 301 of the Trade Act of 1974, which requires consultations with target countries, public hearings and input from affected industries.
Hearings on plant capacity concerns are scheduled for May 5, while hearings on forced labor will be held on April 28.This approach contrasts with the emergency law Trump used in his first year in office, which enabled him to impose tariffs immediately through executive orders. Following the court ruling, the president imposed a 10% tariff on all imports under a separate legal authority, although it can only remain in effect for 150 days.
He said the rate could be raised to the maximum of 15 percent, but he has not done so yet. About twenty US states have already challenged the new definitions.The Department aims to complete its Section 301 investigation before the temporary duties end. The effort highlights the increasing importance the White House is placing on tariffs as a source of revenue amid projections of large federal budget deficits in the coming years.The first probe covers about 70 percent of imports, while the second could extend to nearly all of them, said Erica York, vice president of federal tax policy at the Tax Foundation.“This breadth suggests that the goal is not to address the issues at hand, but instead to re-establish a comprehensive tariff instrument,” she said.Trump has claimed that tariffs could force foreign countries to help finance US government services, although recent economic studies — including work by the Federal Reserve Bank of New York and economists at Harvard University — suggest the costs are largely borne by American businesses and consumers.
In his State of the Union address last month, he offered tariffs as a potential alternative to income taxes.The administration is also seeking to use tariff revenue to offset the fiscal impact of tax cuts extended last year. According to the nonpartisan Congressional Budget Office, the legislation could add $4.7 trillion to the national debt over a decade, while current and proposed fees are expected to cover about $3 trillion of that cost.The Congressional Budget Office said the Supreme Court’s Feb. 20 decision striking down the emergency tariffs removed an estimated $1.6 trillion in expected revenue over the next decade. Some duties remain in place, including previous tariffs on China and Canada imposed after earlier Section 301 investigations, as well as product-specific duties on steel, lumber and automobiles. Add to that the temporary 10 percent fee for this year, and it could generate about $668 billion over the next decade, according to the Tax Foundation.“It will take a significant combination of these other investigations to make up for the (missing) identifications,” York said.Analysts say the administration’s reliance on tariffs is unusual compared to previous governments, which generally used them more narrowly to protect certain industries. Trump also framed the tariffs as a tool to encourage manufacturing to return to the United States and as leverage in trade negotiations.“What makes this really different is the first time that tariffs have been used mainly to raise revenue,” said Kent Smetters, executive director of budget modeling at Penn Wharton.Patel added that revenue increases through legislation would be more predictable. Laws like Section 301 are typically intended to address targeted trade policy concerns rather than broad financial goals.“It’s not supposed to be there to raise revenue,” she said. “If we want to raise revenue through tariffs, Congress must impose broad tariffs.”