The purpose of tariffs is not to generate revenue, and their revenue-boosting benefits will eventually shrink as domestic tax receipts rise, Treasury Secretary Scott Bessent said Sunday.
Why it matters: President Trump keeps touting tariff revenue as a solution to various problems, even as the Supreme Court weighs whether the administration is using tariffs as an illegal tax.
- Just Sunday morning, he promised tariffs would pay down the national debt and fund a $2,000 dividend for most Americans.
- Administration officials have frequently talked about tariff receipts of up to $1 trillion a year offsetting deficits a decade from now.
The big picture: The tension about tariffs' true purpose was evident at the Supreme Court this week, as the government attempted to defend Trump's authority to impose them.
- Trump imposed sweeping tariffs under the International Emergency Economic Powers Act, a 1977 law that empowers presidents to respond to national security threats but had never been used for tariffs before.
- Justices appeared highly skeptical of the argument that tariffs aren't a tax and don't have revenue as their primary purpose.
- If the court rules against the administration, that would toss potentially hundreds of billions of dollars a year in revenue out the window.
What they're saying: "Over the course of the next few years, we could take in trillions of dollars … but the real goal of the tariffs is to re-balance trade and make it more fair," Bessent told ABC's "This Week," touting the eventual benefits of manufacturers re-shoring their operations in the U.S.
- "What would happen over time is, we would take in substantial money as factories come back to the U.S.," he said.
- "Tariff income will be substantial at the beginning, it will come down, and then domestic tax revenues will climb as corporate taxes go up and all these high-paying jobs are created."
By the numbers: The government took in $195 billion in customs duties in the fiscal year that ended Sept. 30, well more than double the prior year.
- Bessent himself has said that could eventually top $500 billion a year; Commerce Secretary Howard Lutnick has said it could double that.
The intrigue: Challenged on the disconnect — Trump touting plans for tariff revenue, while the government argues that's not their purpose — Bessent replied: "It's completely consistent that the revenues come in at the beginning, then as we re-balance, which is the goal of this, bring back high-paid manufacturing jobs to the U.S., then it will then morph into domestic tax revenues."
The bottom line: The fate of the tariffs now rests with the Supreme Court.
- If they're struck down, the government will have to replace that revenue somehow — whether that's their purpose or not — or watch deficits grow even faster.
