Since the launch of the Trump 2.0 era, U.S. President Donald Trump has imposed tariffs on almost all of America's major trading partners. Whether it’s the main adversaries selected by the U.S. President, such as China, or even America's key allies, such as the European Union, Japan, and South Korea, they all face the threat of continuous tariff increases. Initially, many commentators and analysts were pessimistic about this approach. Some believed that Trump’s tariff policies would be opposed and resisted by countries around the world, including the U.S.'s major allies, while others thought the tariffs would cause inflation to soar in the U.S., ultimately fading away in the face of domestic opposition.
Yet, since the second quarter of this year, the trends in key U.S. economic data and the reactions of the countries subjected to tariffs suggest that the actual position of the U.S. in the global economic and trade system may be stronger than what commentators have previously thought. While they might be reluctant, one political leader after another from countries around the world, from Canada to Japan to ASEAN countries, all accepted the U.S.'s tariff demands and reached agreements near the U.S.'s tariff baseline. Moreover, the European Union, which had been protesting and vowing retaliation, also officially complied with the U.S. tariff requirements in August this year.
As things stand, what matters the most is no longer the tariff agreements themselves. According to industry analysts, the series of tariff policy maneuvers is leading to profound changes in the structure of U.S. taxation and the direction of its future economic policies. In the view of ANBOUND’s founder Kung Chan, it is these far-reaching changes that are of greater significance.
First, the rapid increase in tariff revenue is gradually turning it into a key pillar of U.S. public finance. Data from the U.S. Treasury shows that since the White House introduced reciprocal tariffs in April, tariff revenue has surged, reaching USD 26.6 billion in June, being 4.2 times higher than the same period last year, 1.2 times May’s figure, 1.7 times April’s, and 3.1 times March’s.
Analysis by U.S. Customs and Border Protection (CBP) shows that by the end of June, the 10% base rate for reciprocal tariffs had generated over USD 17.7 billion in tariff revenue, while the 25% tariffs on automobiles and auto parts brought in USD 10.7 billion. According to data from the Yale University Budget Research Institute, as of July 13, the average effective tariff rate in the U.S. had reached 20.6%, the highest level since 1910. The ratio of tariffs to total import value has also been rising rapidly, from 2.2%–2.4% before March 2025, to 5.73% in April and 8.11% in May.
Trump had previously announced plans to implement a new round of reciprocal tariff rates starting August 1, expressing optimism about further tariff increases, “we have a lot of money coming in, much more money than the country's ever seen”. Analysts note that with the new rates taking effect, the effective tariff rate could rise even further, and the tariff burden as a percentage of imports could expand to the 10%–15% range. Analysts also believe tariffs are likely to gradually become the second-largest source of revenue for the U.S. government, trailing only corporate income tax.
Second, the rapid increase in tariff revenue is significantly reshaping the U.S. tax structure. Analysts point out that a clear objective of the Trump administration is to leverage the United States’ position as the world’s largest consumer market to negotiate tariff and trade deals that are unilaterally favorable to the U.S. under the banner of "reciprocal" agreements.
Since July, Trump has announced agreements with Vietnam and Indonesia, under which the U.S. maintains high tariffs of 20% and 19% respectively on imports from these countries, while Vietnam and Indonesia impose zero tariffs on U.S. goods. These one-sided agreements, which run counter to WTO rules, have drawn significant attention for their unequal terms. On July 6, White House Council of Economic Advisors Chair Stephen Miran praised the deal with Vietnam during an interview with ABC News. Prior to August 1, countries such as Japan and South Korea also accepted new tariff rates after a series of communications and compromises with the U.S.
Analysts point out that in recent decades, tariff revenue has accounted for only a small portion of total U.S. federal government revenue. For example, in 2024, although total U.S. fiscal revenue amounted to 17.1% of GDP, tariffs contributed only 0.3% of GDP, or about 1.75% of total revenue. However, Trump's new tariffs may reverse this trend.
According to World Bank data, as of 2024, tariffs made up 1.8% of total tax revenue in the U.S., compared to 0.7% in the UK, less than 0.01% in France, and around 1.4% in China. Among the 35 countries and regions where tariffs account for more than 5% of total tax revenue, none are developed economies. However, analysts note that based on the current growth trend of U.S. tariff revenue, in 2025, the share of tariffs in total tax revenue could exceed 6%. As a major developed country, the U.S. is now developing a distinctly unconventional tax structure.
Third, the continued strengthening of tariffs as a pillar of fiscal revenue suggests that even a change in administration is unlikely to reverse this trend. A previous forecast by the U.S. Congressional Budget Office (CBO), which did not yet include Trump’s latest tariff actions after mid-May, such as tariffs on copper, estimated that increased tariffs would reduce the U.S. federal deficit by a total of USD 2.8 trillion by 2035, accounting for about 4% of the projected USD 67.5 trillion in total tax revenue. Analysts note that removing these USD 2.8 trillion in additional tariffs would be roughly equivalent to cutting the U.S. corporate income tax rate to one-third of its current level, something that would likely worsen the fiscal situation. In this sense, tariffs risk becoming a kind of “fiscal addiction” for the U.S.
In fact, even the most recent history has shown that U.S. tariff hikes can easily be carried over by a new administration. A typical example is the tariffs imposed on China by Trump’s first administration starting in 2018, citing intellectual property violations and covering a wide range of product categories. Analysts point out that when Biden took office, his administration initially considered lifting Trump’s tariffs, but ultimately chose to maintain them. At the same time, it used the opportunity to pressure China to correct its “unfair trade practices” and pushed forward a security-driven restructuring of supply chains. Tariffs on key sectors such as electric vehicles (EVs), steel, and semiconductors were even further increased. Indeed, both the Biden administration and Trump’s first term made some tariff reductions on Chinese goods, but these were mostly one-off measures in response to emergencies, such as the worsening COVID-19 outbreak in the U.S., and they did not represent a fundamental shift in the country’s core trade policy stance.
Fourth, the inflation trend following the U.S. tariff hikes may further strengthen the influence of "Trumponomics". Although U.S. tariff revenue saw significant growth in June, both year-over-year and month-over-month, current data suggests that the impact of tariffs on U.S. prices remains limited. In June, the Consumer Price Index (CPI) rose 0.3% month-over-month and 2.7% year-over-year, roughly in line with market expectations. The core inflation rate, which excludes volatile food and energy prices, rose 0.2% month-over-month, which was below the expected 0.3%, as well as 2.9% year-over-year, matching forecasts. Breaking it down, the main drivers of the CPI increase in June were food and housing, which are unrelated to tariffs, while prices in tariff-related categories such as automobiles actually declined.
As for the Producer Price Index (PPI), which is more sensitive to tariffs, the month-over-month change in June was zero, a 0.3 percentage point drop from May, and below the expected 0.2% increase. The year-over-year PPI rose 2.3%, down 0.4 percentage points from May. The core PPI, excluding food and energy, was flat month-over-month, and up 2.6% year-over-year, both unchanged from May and below economists’ expectations.
Since February, China, the first country to be hit with additional U.S. tariffs, has seen a decline in its export prices to the U.S. According to data from the U.S. Department of Labor, as of May 2025, the overall price of U.S. imports from China had fallen by about 2% compared to December 2024. Analysts note that it is reasonable to infer that, in response to high U.S. tariffs, Chinese exporters lowered their export prices to mitigate the impact of tariffs on their shipments. This is likely a key reason why the tariff hikes have not driven up U.S. inflation. In the context of global supply overcapacity, exporters are being drawn to the vast U.S. market and are willing to cut prices to offset the tariff burden.
Additionally, the price of Japanese passenger cars exported to the U.S. has also dropped significantly. According to data from the Bank of Japan, between March and May, prices for Japanese car exports to North America fell by 17.7%. Analysts believe Japanese exporters are prioritizing market share, choosing to cut prices and absorb the loss in profits rather than risk higher prices for consumers in the U.S.
Major exporters to the U.S. have been actively offsetting the cost increases from tariffs by lowering their prices, a strategy that has significantly reduced the impact of tariffs on U.S. consumer prices. This is also a key reason why Trump has been able to continue using tariffs as leverage to pressure other countries. On July 8, the White House Council of Economic Advisors released an analysis stating that even with the added tariff costs, the prices of imported goods remain cheaper than they were before the tariffs were imposed. This situation may encourage the Trump administration to maintain or even strengthen existing tariff policies, as it appears to validate the “optimal tariff theory”, which holds that when a major power raises tariffs, reduced demand can lead to lower prices for imported goods, thereby offsetting the tariff impact.
When urging Federal Reserve Chair Jerome Powell to cut interest rates, Trump posted on his social network that “someone should show (Miran’s) new Study to ‘Too Late’ Jerome Powell, who has been whining like a baby about non-existent Inflation for months, and refusing to do the right thing”. This is, of course, typical of Trump, who is always eager to prove he is right. However, what should truly raise concern is the clear warning from ANBOUND’s founder Kung Chan. He believes that the current tariff war is only the first wave. In the transition from globalization to de-globalization, countries around the world will increasingly raise tariffs. So far, the adjustments have mostly targeted tariffs on the U.S., but in the future, there will be many more tariff adjustments between countries. Overall, tariffs will continue to rise, building higher trade barriers and boosting national fiscal revenues. This is an inevitable aspect of de-globalization.
Kung Chan remarked with concern that de-globalization has been discussed for over a decade, yet very few truly understand it, and that is the most dangerous part, as when people try to predict or analyze issues, they fail to start from the underlying logic, and instead just focus on the surface-level of the numbers and figures.
Final analysis conclusion:
When evaluating any economic policy, its long-term impact is the ultimate measure of success. As for the immediate effects of the tariff measures launched under Trump’s second term, they cannot yet be taken as definitive proof of the success of “Trumponomics”. Even Goldman Sachs noted in a recent report that it is still too early to declare victory. However, one thing is clear: through this series of actions, the structure and sources of U.S. tax revenue are undergoing a fundamental shift. The relatively positive outcomes of the tariffs also suggest that Trumponomics is not entirely without merit. This, in turn, means that these policies are likely to persist in the long run, and what is happening right now may well be only the beginning.
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Zhou Chao is a Research Fellow for Geopolitical Strategy programme at ANBOUND, an independent think tank.
