Research & Analysis
Historical evidence and recent studies show that tariffs are taxes that raise prices and reduce available quantities of goods and services for US businesses and consumers, which results in lower income, reduced employment, and lower economic output. For example, the effects of higher steel prices, largely a result of the Bush administration’s 2002 US steel tariffs, led to a loss of nearly 200,000 jobs in the steel-consuming sector, a loss larger than the total employment in the steel-producing sector at the time. It’s also worth noting that measures of trade flows, such as the trade balance, are accounting identities and should not be misunderstood to be indicators of economic health.
We estimate Trump’s proposed tariffs and partial retaliation from all trading partners would together offset more than two-thirds of the long-run economic benefit of his proposed tax cuts. Explore Trump’s latest trade actions with our Tariff Tracker
Our Tariff Tracker analyzes how changes in US tariff policy affect tariff rates, the balance of trade, customs duties collections, the US economy, federal tax revenues, and US taxpayer and household burdens.
The economic damage from a chaotic tariff regime can outweigh the revenue itself, and unlike the tariffs, it cannot be refunded.
4 min read
Full expensing under the One Big Beautiful Bill Act does not neutralize the tariff burden on imported goods, as former White House Council of Economic Advisers chair Stephen Miran asserts.
8 min read
The Trump tariffs will likely raise the cost of food for Americans, particularly for liqueurs and spirits, baked goods, coffee, fish, and beer.
4 min read
As US businesses and consumers face higher costs of goods due to the Trump tariffs, Senator Hawley (R-MO) has introduced legislation to rebate tariff revenue to provide financial relief. The proposal takes a similar approach to the stimulus checks issued during the COVID-19 pandemic.
4 min read
Do tariffs really level the playing field, or are they just bad economics? In this emergency episode, we fact-check the Trump administration’s claims that retaliatory tariffs make trade fairer.
Rather than hurting foreign exporters, the economic evidence shows American firms and consumers were hardest hit by tariffs imposed during President Trump’s first-term.
5 min read
Contrary to the president’s promises, the tariffs will cause short-term pain and long-term pain, no matter the ways people and businesses change their behavior.
5 min read
While tariffs are often presented as tools to enhance US competitiveness, a long history of evidence and recent experience shows they lead to increased costs for consumers and unprotected producers and harmful retaliation, which outweighs the benefits afforded to protected industries.
As we learned in the first trade war, retaliation will exact harm on US exporters by lowering their export sales—and the US-imposed tariffs will directly harm exporters too. US-imposed tariffs can burden exporters by increasing input costs, which acts like a tax on exports.
4 min read
The Trump administration appears to be moving in a “reciprocal” policy direction despite the significant negative economic consequences for American consumers of across-the-board tariffs on goods coming into the US. However, the EU’s VAT system should not be used as a justification for retaliatory tariffs.
6 min read
Using tariff policy to reallocate investment and jobs is a costly mistake—that’s a history lesson we should not forget.
6 min read
Lawmakers will need to pursue fiscal responsibility as they address the tax law expirations, but fiscal responsibility requires finding sound ways to pay for spending priorities. Tariffs don’t make the cut.
4 min read
Estimating the economic effects of different types of taxes informs policymakers about the trade-offs of raising revenue in a given way.
5 min read
Can tariffs truly replace income taxes in today’s economy? In this episode, we examine the bold and controversial proposal from former President Trump to replace income taxes with tariffs. What would this dramatic shift mean for everyday Americans, particularly those with lower incomes? And would it actually work?
The economic damage from a chaotic tariff regime can outweigh the revenue itself, and unlike the tariffs, it cannot be refunded.
4 min read
Full expensing under the One Big Beautiful Bill Act does not neutralize the tariff burden on imported goods, as former White House Council of Economic Advisers chair Stephen Miran asserts.
8 min read
President Donald Trump has decided against a clean extension of the US-Mexico-Canada Agreement (USMCA), allowing the bloc of countries to enter a prolonged period of annual reviews, renegotiations, and, possibly, a shift to bilateral deals.
Short FormJust as many parts of American life have transformed over the past 250 years, so too has the federal tax system. While most taxes levied in the 18th century are still levied in some form today, the federal government’s reliance on them, the complexity of the tax code, and Americans’ overall tax burdens have shifted considerably.
5 min read
With nearly 2 million US jobs tied to trade with Canada and Mexico, stalling renewal — or withdrawing outright — would compound tariff uncertainty at exactly the wrong time.
6 min read
Digital services taxes address a real concern—the need to adapt taxation to the digital economy—but they are not the right solution. They raise limited revenue, are often passed on to consumers rather than large digital firms, create economic distortions, increase complexity and compliance costs, negatively impact innovation and competitiveness, and risk international retaliation.
Since digital services taxes generate little revenue, place the cost on European consumers and not on large digital companies as intended, and risk escalating trade disputes, policymakers should rethink their strategy.
14 min read
Publicly held debt is projected to rise to a new record high of 106 percent of GDP within the next four years and continue to rise to 120 percent by 2036 and 175 percent by 2056.
8 min read
Currently, about half of all European OECD countries have either announced, proposed, or implemented a digital services tax. Because these taxes mainly impact US companies and are thus perceived as discriminatory, the US responded with retaliatory tariff threats.
5 min read
Testifying to Congress, United States Trade Representative Jamieson Greer argued that “President Trump’s trade policy is working.” The data present a different picture: President Trump’s trade agenda is actually holding back the economy.
This study simulates several large tax increases and consistently finds that even tax increases large enough to close the primary deficit in the near term will lose ground over time and fail to put the debt on a sustainable course.
41 min read
For many, the OBBBA made tax filing easier and put more money back into their pockets. But it didn’t improve the grade for overall tax complexity for the US. It may actually make the situation worse.
Policymakers should broaden and make permanent full expensing for additional asset classes and pursue structural reforms that reduce distortions in how businesses are taxed. A more consistent and predictable policy environment, paired with targeted improvements to loss treatment, R&D incentives, and compliance burdens, would give small business owners greater confidence to invest, hire, and grow.
The US, as the world’s largest services exporter, has a stronger interest in combating discriminatory services taxation than in pursuing tariffs.
44 min read
The evidence overall paints a far different picture than American Compass presents, and a consistent theoretical framework undercuts its assertions of how tariffs should be expected to impact the economy moving forward.
25 min read
One year later, the evidence shows the tariffs were not reciprocal, did not generate the promised investment boom, raised less revenue than projected, and contributed to higher prices.
One year after “Liberation Day,” evidence shows President Trump’s tariffs were not reciprocal, did not generate the promised investment boom, raised less revenue than projected, and contributed to higher prices.
7 min read
Unlike the IEEPA tariffs, which were stopped by the Supreme Court, the new Sec. 122 tariffs require congressional authorization after 150 days.
Thought the Trump administration has not yet imposed new, industry-specific tariffs on drugs or active pharmaceutical ingredients, such tariffs would be a hidden cost on Americans: they would shrink incomes, reduce investment, and lead to less innovation.
7 min read
What is a border adjustment? Is it a new idea? How would it work in practice?
11 min read