On April 7, U.S. Treasury Secretary Scott Bessent sat down with Tucker Carlson to discuss President Donald Trump’s tariff plan. Bessent immediately began the interview by distinguishing the three purposes of tariffs: (1) revenue, (2) protection, and (3) negotiating policy concessions from foreign governments.
This last purpose, opposed as incompatible with the first two purposes by protectionists, is often framed as “reciprocity.”
The interview was a good, albeit high-level discussion of America’s economic woes. What follows here will be a brass tacks review of the president’s actions towards the three purposes.
Tariffs for Revenue
Trump’s revenue tariffs alone will generate more than enough income this year to replace the income tax paid by the bottom 75 percent of personal income tax payers.
It’s an awkward thing to talk about, however, because none of the tariff powers delegated to the president by Congress list revenue raising as a purpose. This legal situation leads to some mixed messaging about Trump’s two biggest tariff revenue–raising orders.
Specifically, the two big tariff revenue generators exist as a collection of Executive Orders (EOs), all issued under the International Emergency Economic Powers Act of 1977 (IEEPA). These IEEPA EOs in turn can be categorized into two groups: the “IEEPA-Fentanyl” tariffs and the “IEEPA-Reciprocity” tariffs.
+10 percent universal (almost): The president campaigned on a supplemental universal 10 percent tariff, and he has delivered. On April 2, Liberation Day, President Trump issued EO 14257, the “IEEPA-Reciprocity” action, which applied a universal 10 percent tariff to all imports from all countries, except merchandise imported from Canada and Mexico. (And, for benign reasons, the four countries with whom Congress has not bestowed normal trade relations, Belarus, Cuba, Russia, and North Korea, were also excluded).
In 2024, the U.S. imported $3.3 trillion in goods. Subtract $422 billion for Canada and $505 billion for Mexico, and that leaves you with ~$2.3 trillion in affected imports. An additional 10 percent should be expected to have virtually no protective effect, so this action should generate about $230 billion annually.
+20 percent for China: Earlier, on February 4, per EO 14195, the “IEEPA-Fentanyl-China” action, a supplemental 20 percent tariff was applied to all merchandise made in China and Hong Kong. In 2024, the U.S. imported $439 billion in goods from China (although this is a significant undercount, due to the de minimis loophole, which will only be repealed for China on May 2). This 20 percent would thus generate $87.8 billion by itself, assuming no protective effect. It does “stack” with the universal tariff, and 30 percent is sufficiently high to motivate some sourcing to leave China for other countries. Nevertheless, due these and other actions discussed below, any prediction of total tariff revenue from China for 2025 is a guesstimate.
Canada and Mexico are not off the hook, however, as they were also part of the “IEEPA-Fentanyl” action. Under EOs 14193 and 14194 respectively, merchandise that may sufficiently meet customs rules to be labeled “Product of Canada” or “Product of Mexico,” but do not meet heightened USMCA rules of origin, are subject to a 25 percent supplemental tariff. In manufacturing, this is not an inconsequential distinction.
Despite all the uncertainty, a positive revenue of $250 billion to $300 billion in 2025 feels like a good guess from the IEEPA tariff actions. This is huge, in terms of federal revenue. For context, according to a Tax Foundation analysis of federal income tax payments published in 2025, the bottom 75 percent of income tax payers paid $274.1 billion in federal income tax. This means that Trump could take credit for eliminating income tax for the bottom three-quarters of payers with his new revenue tariffs.
Worryingly, though, is that the Trump administration has apparently preemptively given up convincing Congress to legislate these revenue tariffs as part of this year’s renewal of the 2017 Tax Cuts and Jobs Act. Bessent said so to Tucker: “We will not get credit for the tariffs in any bill, because Congress is not going to legislate it.”
Giving up on Congress legislating these tariffs would be a grave mistake. Multiple lawsuits have been filed against the validity of the IEEPA actions, including by California, another coalition of 12 states, and prominent legal NGOs. The Department of Justice moved to consolidate the cases at the U.S. Court of International Trade, and, fortunately, a three-judge panel there rejected a temporary restraining order on April 22. Nonetheless, success in court is not assured. Paying for legislated tax cuts with presidential tariff actions could be a sure-fire way to a credit and financial crisis if they were struck down. And refusing to legislate the tariffs also undermines businesses’ comfort level to make investment decisions around them.
Congressional Republicans should fall in line. At the 2024 Republican National Convention, the GOP resolved to “revoke China’s Most Favored Nation (MFN) status”. As it happens, this would roughly approximate China’s combined 30 percent tariff increase (10 percent universal and 20 percent “fentanyl”), as its MFN repeal would necessitate moving China to Column 2 of the U.S. tariff schedule, with its average 32 percent rate. So legislating these China revenue tariffs could be done by MFN repeal, which is already Republican Party policy. And as for the 10 percent universal for the rest of the world, the Republican-controlled 119th Congress should recognize that American voters chose the universal 10 percent tariff the president campaigned on, and embrace the revenue.
“Duties on Tonnage” Makes a Return
Typically ignored in tariff histories, the United States used to assess “duties on tonnage” to help fund its own merchant marine, on top of tariffs. Whereas “tariffs” are understood to mean duties with rates varying by product, duties on “tonnage” are simply that: a fee based on the volume of merchandise, irrespective of what it is. The duties on tonnage could be minimized—or avoided entirely—if the merchandise arrived on U.S.-built ships owned by American operators with American crews.
In 1789, the duties on tonnage were assessed at:
- 6 cents per ton on vessels built in U.S., or belonging to U.S. citizens
- 30 cents per ton on vessels built in U.S., belonging to foreigners
- 50 cents per ton on all others
The Office of United States Trade Representative (USTR), under authority from Section 301 of the Trade Act of 1974, has instituted a similar duties-on-tonnage policy designed to prejudice Chinese-build ships. Beginning October 14, 2025,
- Chinese-built and owned ships will be charged $50 a net ton, a rate that will increase by $30 a year over the next three years.
- Chinese-built ships owned by non-Chinese firms will be charged $18 a net ton, with annual fee increases of $5 over the same period.
Adjusting for inflation, 1789’s 50 cents per ton on foreign ships is $16.67 today, closely approximating the new $18 per ton. (Neat!) But making this new duties-on-tonnage “anti-Chinese ships” as opposed to “pro-U.S. ships” means this action should be lumped in with the administration’s revenue actions as opposed to the protective actions discussed below. That’s an artifact of USTR’s Section 301 power being designed to sanction particular “unfair” countries, as opposed to a tool to promote U.S. production. But the fact that the concept has returned should be celebrated. Hopefully it too can be picked up and built upon by Congress.
Tariffs for Protection
As with revenue, the Trump administration is off to a similarly fabulous start on protective tariffs. The strongest presidential tool for protective tariffs is Section 232 of the Trade Expansion Act of 1962, the so-called “National Security” tariff authority. The reason Section 232 is the best for protection is because there is no pretense of foreign “unfair” action needed. Section 232 readily contemplates that import reliance can be a national security vulnerability, and thus authorizes the president to “adjust imports” globally as he sees fit. For this reason, instead of forcing the president to react to policies of particular foreign nations, Section 232 tariffs are inherently “global,” making them much more useful. (Country exemptions are still within the president’s 232 power.)
In his first term, Trump completed Section 232 investigations on steel, aluminum, and automotive. Steel and aluminum tariffs were deployed at 25 percent and 10 percent respectively, although automotive tariffs were held off in lieu of USMCA negotiation.
Now, in his first 100 days, Trump has raised the aluminum tariffs from 10 percent to 25 percent; and very significantly, for both the steel and aluminum actions, industry will be able to petition directly to the Department of Commerce to expand the covered-product list by May 11. This is a reversal from the last Trump Administration, where the Commerce petition-portals were dedicated to authorizing product exemptions. Similarly, the president has acted on the automotive investigation to impose 25 percent tariffs on cars (except for Mexican and Canadian cars that meet heightened USMCA origin rules). Another campaign pledge delivered.
Very encouragingly, Trump has also launched five additional Section 232 investigations. These are deep dives that will study entire supply chains. The titular leads of the investigations are copper, timber and lumber, semiconductors and semiconductor manufacturing equipment, pharmaceuticals and pharmaceutical ingredients, critical minerals, and medium-to-heavy trucks.
Critical to appreciate is that for each of these investigations, President Trump explicitly directed Commerce to look to “derivative” downstream products.
Commerce’s 2018 and 2019 metal and automotive 232 reports were all very impressive and highly detailed. One area that needs improvement is recommended relief. The department has used a flawed economic model that exaggerates projected import declines from very modest ad valorem tariffs, which are assessed on an alleged foreign invoice price. As U.S. customs valuation laws are riddled with loopholes, the department should look to specific tariffs, which are duties assessed on a volume (e.g. $/ton or $/unit), as opposed to alleged value.
Similar to the phase-in of duties on tonnage, the Department of Commerce should consider phased-in duties and/or quotas for products that are not yet produced domestically.
For example, on the pharmaceutical 232 action, a 25 percent tariff will do absolutely nothing for protection, nor would it even generate meaningful revenue as the markup is in domestic distribution. A phased-in tariff rate quota assessed on units as opposed to overseas invoices is the only practical method to address the reshoring goal.
Tariffs to Extract Concessions from Foreign Governments
Finally, we turn to what Bessent described to Tucker as the “third leg to the stool— tariffs to negotiate”.
The “negotiating tariffs” have dominated public discussion and a myopic media lump all of the administration’s tariff actions together as a “trade war,” omitting discussion of the 10 percent universal as well as the litany of Section 232 tariff actions.
This is unfortunate, especially from a protectionist perspective. Tariffs to “negotiate” are incompatible with the twin goals of revenue and protection. After all, if the stated purpose of a tariff is to obtain a concession from another country, then the revenue cannot be budgeted for, nor can any business make any investment decisions around the tariff given that it could disappear at any time.
So the best parts of Trump’s tariff policy are absent from the zeitgeist and public consciousness.
Nonetheless, the “negotiating tariffs” have had wins that should be acknowledged. What follows is an overview of the mechanics of the negotiating tariffs, as well as the good and negative results, and considerations for where the administration should go from here.
These “negotiating tariffs” were contained in the same Liberation Day EO that introduced the 10 percent universal tariff: the “IEEPA-Reciprocity” EO 14257 discussed above. Specifically, the varying country-specific rates were listed in an Annex I to the order, with the names of 56 countries and customs territories.
The Annex 1 country-rates were calculated with a formula relating to deficits, leading to some peculiar outcomes, like all imports from Madagascar being subject to a 47 percent rate. Notable increases included Europe at an increase of 20 percent, Korea at 25 percent, Taiwan at 32 percent, and China at 34 percent.
Whereas the 10 percent went into effect on April 5, the Annex I rates were set to go into effect April 9. And they did, for a day. China retaliated with an 84 percent tariff on all U.S. exports to the country, but the rest of the world took Trump’s warning against retaliation to heart.
(An important detail is that all presidential tariff actions “stack,” with the exception of goods subject to 232 tariffs—or expected to be subject to 232 tariffs—exempted from the rates in the IEEPA-Reciprocity order. China’s Annex 1 rate does stack with its 20 percent IEEPA-Fentanyl tariff, as well as any applicable Section 301 tariffs or standard normal trade relations tariff. There may be further de-stacking in the near-term.)
The following day, on April 10, President Trump issued EO 14266, suspending the Annex 1 rates for all countries except for China, which had its Annex 1 rate increased from 34 percent to 125 percent. In suspending the Annex 1 rates for other countries, the EO noted that “more than 75 other foreign trading partners … have approached the United States to address the lack of trade reciprocity”.
As Trump’s first 100 days draws to a close, China remains the only country with Annex 1 rates in effect.
Trump managed to deliver in a matter of days what globalists had yearned for over decades.
For decades before Trump, administrations and every successive Congress has championed “market access” abroad as an imperative to U.S. growth. “Market access” is their term for other countries lowering tariffs and other “trade barriers.” They apparently sincerely believe that if other countries would only further lower trade barriers, American prosperity would soar. They say this in spite of the American carnage wrought by trade liberalization all around them, and without regard to the failures of all their optimistic projections at the conclusion of nearly a century’s worth of trade-liberalization agreements.
Ever heard of the Doha Round? Launched in Qatar two months after 9/11, it was the ninth global “multilateral” tariff liberalization negotiation round of the General Agreement on Tariffs and Trade (GATT). Since 1947, GATT negotiation rounds had been the primary channel for countries to reduce tariffs. The prior round, known as the Uruguay Round, lasted from September 1986 to April 1994. As was always the case in GATT negotiations, the United States had given away the most, and by the end of the Uruguay Round, the United States had bound itself to an utterly inconsequential 3.4 percent average tariff rate, the lowest of any nation in the GATT—that is to say, the world. This history is documented in the introduction to the IEEPA-Reciprocity Liberation Day EO.
Hundreds of U.S. government policy professionals, backed by thousands of lobbyists, globalist NGOs, and academics, spent the better part of their careers pursuing market access abroad via the Doha Round. They failed, and the negotiations finally died off in December 2015. Indeed, the whole modern trade deal era wherein the United States enters into preferential tariff agreements with random countries abroad only came about as part of a “FOMO” (Fear of Missing Out) policy launched by George W. Bush’s USTR, Bob Zoellick. Zoellick believed that if he started reducing our 3.4 percent average even further via bilateral agreements, the Doha powerhouses of China, Brazil, India, et al. would cave and start making concessions in the GATT negotiations. Zoellick’s gamble, the resolutions and “Fast Track” bills from Congressional leaders, and the careers of hundreds of trade policy wonks, were all for naught.
Then along comes Trump, and in a matter of weeks, wins market access concessions the globalists failed to achieve over decades. And all he had to do was impose those Annex 1 rates for a single day to show he was serious. More than 50 countries have approached USTR for a deal to avoid Annex 1 rates, and countries including Argentina, Cambodia, India, Indonesia, Israel, Thailand, and Vietnam began making unilateral tariff concessions.
Fortunately, Trump knows that “market access” is of little value. Case in point is that Europe’s offer of “zero for zero” tariffs on all industrial goods was rejected out of hand by Trump.
The focus on actual outcomes, as opposed to “market access” or “rules-based” trade, is extremely welcome.
Finally, the Annex 1 tariffs have proved extremely helpful to longtime entrenched DC trade policy interests, as well as the newer arrivals to the table, Big Tech and Big Oil.
In 2015, the United States repealed its ban on exports of oil and gas that had been instituted after the Arab oil embargo. This led Big Oil to the trade policy table, and the shift in rhetoric from energy independence to energy dominance. Their muscle was shown when Trump responded to Europe’s zero-for-zero deal with a suggestion that Europe buy $350 billion in American energy exports to offset the trade deficit.
Also around the middle of the last decade, foreign governments began to figure out that Big Tech was making lots of money in their country at the expense of traditional domestic businesses while paying little to nothing in taxes. So governments began formulating “digital” taxes, and Big Tech enlisted trade policy negotiators to go to bat for them. The Trump administration has delivered major wins here too, in India and elsewhere.
The American Protective Tariff League resolved over a century ago that using tariffs to achieve policy concessions abroad is “unsound in principle, pernicious in practice, and is contrary alike to the principle of protection, to the fair treatment of domestic producers, and to the friendly relations with foreign countries.” The practice known as “reciprocity,” the resolution continued, “is neither ethical nor economic, since it seeks to benefit some industries by the sacrifice of others, which is the essence of injustice.… It would tend to array industry against industry and section against section at home, and forment industrial retaliation and political antagonism abroad.”
The Trump Administration—certainly Trump himself, as well as Bessent and Commerce Secretary Howard Lutnick—convey an appreciation of the League’s warnings. It seems quite likely that no country aside from China will see their Annex 1 rates go into effect; and in any event, application of a Section 232 action to a product exempts that product. This is all a good thing for protectionists and those seeking a sound, lasting tariff policy.
Similarly, Trump’s statement on April 22 that he expects China’s tariffs to come down “substantially” should be a welcome development for tariff enthusiasts. To drive home the point: Tariffs premised on negotiations are not helpful to business leaders aside from the select few championed at the negotiating table. The uncertainty surrounding negotiating tariffs stalls business decisions and undermines Americans’ perception about tariffs as a policy. The 125 percent Annex 1 tariff stacked with the 20 percent fentanyl tariff for China was in many instances acting as an embargo that could yet lead to unnecessary scarcity.
President Ronald Reagan was an unrepentant free trader, but he was compelled to restrict imports on numerous occasions by a Congress demanding action.
One such instance was the summer of 1983, when surging beef imports forced the president’s hand under the Meat Import Act of 1979. Not wanting to be seen to violate the GATT, the Reagan White House asked Australia, New Zealand, and Canada to voluntarily restrict their own exports. (In trade policy, this is known as a “voluntary restraint agreement,” an effective outsourcing of trade policy and a favorite Reagan approach.)
Australian beef exports to the U.S. were surging, and a driving force behind activation of the quota law. But as the Reagan White House observed, “the Australians seem almost delighted with the prospect of quotas. They are finding the New Zealand Meat Board to be a formidable world competitor this year.”
The judicious allocation of import quota to friendly countries on products where we are import reliant (so, most things) is how the Trump administration can pursue a pro-tariff policy of revenue and protection, while also negotiating deals that actually make allies happy and supportive, which in turn will drive the long-term political support necessary for reindustrialization.
An example of how this can work in the automotive sector: With Mexico, we had an absurd trade deficit of 2,809,083 cars in 2024 (they sent us 2.9 million, we sent them 152,000.) It’s 22 cars to 1.
But even as we restrain vehicle imports to ensure that most cars sold in America are made in America, we have the opportunity to do deals with foreign nations to smooth out the transition. With Canada, our trade deficit in cars was a more modest 436k vehicles. Still too high. But over the last ten years, Canada’s car exports to the U.S. have fallen by half, from over 2 million to just over 1 million. U.S. car exports to Canada have fallen from 880,000 to 628,000 over that same time—less drastic. Both countries have suffered tremendously against low-wage imports from Mexico.
In this example, there’s no question, restraints against Mexican vehicle imports are necessary. But quotas can be awarded to prevent retaliation by way of tariff-rate quota. An “in-quota” tariff rate can be used (e.g. the 10 percent universal) on Canada’s first 600 exports here, with higher “over-quota” rates phased-in to ‘cap’ the amount of import penetration.
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This is not a new concept. The United States Department of Agriculture, in concert with USTR, has successfully awarded sugar-import quotas on a country-by-country basis for decades. And in May 2018, the Trump Administration managed to move Korea, Brazil, and Argentina to firm steel import quotas within two months of launching the steel 232 action.
Allocating product-specific quotas within Section 232 actions will help glide the United States to a stable and successful reindustrialization and self-reliance on food production without the drama of country-wide tariff actions. By focusing all deals on product-specific quotas, the media is forced to talk about product-specific import sensitivities, and denied the opportunity to dig up stories designed to put tariffs in the worst light.
While the negotiating tariffs have brought a lot of drama and media antagonism, they are ultimately what was demanded of entrenched DC interests, and likely unavoidable in these first 100 days. What Trump has done is historic, as such sweeping efforts have no precedent in peace time. He is the only good tariff president since the presidential tariff era began in 1934, and if he can cajole Congress into cementing his revenue and protection tariff actions, is well on the course to launching a new Golden Age for America.
