Option 81:

Introduce a 10 Percent Universal Tariff

Topline Estimates

Gross Domestic Product (GDP)
-0.4%
Gross National Product (GNP)
-0.2%
Full-Time Equivalent Jobs
-395K
Wage Rate
0.0%
Capital Stock
-0.3%
Conventional Primary Deficit Change (10‑Yr)
-$1,996.2B
Dynamic Primary Deficit Change (10‑Yr)
-$1,522.6B
Dynamic Total Deficit Change (10‑Yr)
-$1,833.5B

Source: Tax Foundation General Equilibrium Model.

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.

Modeled Results

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About the Authors

Erica York Tax Foundation
Expert

Erica York

Vice President of Federal Tax Policy

Erica York is Vice President of Federal Tax Policy with Tax Foundation’s Center for Federal Tax Policy. Her analysis has been featured in The Wall Street Journal, The Washington Post, Politico, and other national and international media outlets.

Garrett Watson Tax Foundation
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Garrett Watson

Director of Policy Analysis

Garrett Watson is Director of Policy Analysis at the Tax Foundation, where he conducts research on federal and state tax policy. His work has been featured in The Washington Post, The Atlantic, Politico, the Associated Press and other major outlets.

Huaqun Li Tax Foundation
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Huaqun Li

Senior Economist, Director of Modeling Projects

Dr. Huaqun Li is Senior Economist, Director of Modeling Projects at the Tax Foundation. She focuses on developing and maintaining the Foundation’s Taxes and Growth Model, which models the budgetary and economic effects of changes to federal tax policy.

William McBride or Will McBride Tax Foundation
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William McBride

Chief Economist & Stephen J. Entin Fellow in Economics

Dr. William McBride is the Chief Economist & Stephen J. Entin Fellow in Economics at the Tax Foundation, where he oversees major research projects primarily related to reforming the federal tax code, advancing sound tax policy, and improving the federal government’s fiscal outlook.

Alex Durante Tax Foundation
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Alex Durante

Senior Economist

Alex Durante is a Senior Economist at the Tax Foundation, working on federal tax policy and model development. Alex worked as a research assistant at the Federal Reserve Board and served as a staff economist on the Council of Economic Advisers.

Alex Muresianu Tax Foundation
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Alex Muresianu

Senior Policy Analyst

Alex Muresianu is a Senior Policy Analyst at the Tax Foundation, focused on federal tax policy. Previously working on the federal team as an intern in the summer of 2018 and as a research assistant in summer 2020. He attended Tufts University, graduating with a degree in economics and minors in finance and political science.

Peter Van Ness Tax Foundation

Peter Van Ness

Research Software Developer

Peter Van Ness is a Research Software Developer at the Tax Foundation working on federal tax policy and model development. Peter previously worked as a research assistant at another think tank and as a data analyst at a consulting firm.

Aleksei Shilov Tax Foundation Research Software Developer

Aleksei Shilov

Research Software Developer

Aleksei Shilov is a Research Software developer at the Tax Foundation working on economic model development and federal tax policy. Aleksei joined the Tax Foundation as an intern in January 2025. He holds a B.S. in computer science and a minor in economics from Northeastern University and is currently based in Boston, MA.

Daniel Bunn Tax Foundation President & CEO
Expert

Daniel Bunn

President and CEO

Daniel Bunn is President and CEO of the Tax Foundation. Daniel has been with the organization since 2018 and, prior to becoming President, successfully built its Center for Global Tax Policy, expanding the Tax Foundation’s reach and impact around the world. Prior to joining the Tax Foundation, Daniel worked in the United States Senate at the Joint Economic Committee.