Less than two months into his second term, U.S. President Donald Trump has made good—with startling intensity—on his campaign promise to impose tariffs. On inauguration day, he issued the America First Trade Policy Memorandum to review U.S. trade policy with an eye toward a new tariff regime. Over the first two weeks of February, he set in motion new duties covering nearly half a trillion dollars of U.S. imports. On March 4, he doubled the size of his already significant February tariff increase on China. Over this period, he has also announced, suspended, announced again, and suspended again 25 percent tariffs on goods from Canada and Mexico. And his administration has pledged to impose reciprocal tariffs on April 2.

The result has been uncertainty, chaos, and immediate retaliation from some of the United States’ biggest trade partners. All this economic upheaval raises a central question: Why is Trump so focused on tariffs? They are a longtime obsession. When he declared in his second inaugural address that “we will tariff and tax foreign countries to enrich our citizens,” Trump was echoing, almost verbatim, comments from his first term. Trump’s view seems to be that tariffs can be used to fix anything. They can raise tax revenue from foreigners to replace domestic taxes, eliminate the trade deficit by rebalancing trade, ensure reciprocity so that other countries impose lower tariffs on U.S. exporters, reshore manufacturing jobs to the United States, protect national security and end dependence on adversarial suppliers, and punish countries for unrelated sins, such as failing to stop migration.

Tariffs can, in fact, sometimes help achieve some of these objectives. Targeted tariffs can be a useful instrument to shift sourcing away from unfriendly countries. But they are almost never the best policy to tackle the challenges that concern Trump. And given the complex, interconnected nature of these problems, using tariffs to fix one of them could hamper the country’s ability to solve another.

The Trump administration should instead make use of a fuller inventory of economic policies. Its potential toolbox is huge and includes such strategies as working with allies to diversify supply chains for critical industries, reducing the fiscal deficit, and changing the U.S. tax code so it diminishes corporations’ incentives to offshore production or even encourages them to create manufacturing jobs. So many of the problems the Trump administration identifies in the U.S. economy have their origins at home. Beating up trading partners not only fails to solve these underlying problems; it also harms the U.S. economy while fostering foreign resentment and retaliation that compound the damage.

Trump is correct in his assertion that tariffs raise government revenue. But they do so inefficiently compared with other taxes. Unlike tariffs, alternative forms of taxation collect large amounts of revenue and impose few economic distortions—particularly forms of taxation that apply low tax rates to a large tax base. There is no way that tariffs could replace them as a revenue source. For example, in the 2024 fiscal year, the U.S. federal government spent a total of $6.4 trillion. Yet in 2024, the United States imported only $3.3 trillion worth of goods. Even a 100 percent tariff on all imported goods would not be enough to finance the federal government, and any tariff on that level would also severely cut imports, dramatically reducing U.S. revenue and inflicting enormous costs on the economy.

By contrast, some 60 percent of the federal government’s revenue has in recent years come from personal and corporate income taxes. Americans’ personal income, which totaled $24.7 trillion in 2024, combined with corporate income make up a much larger tax base and will not shrivel as fast as imports when hit with taxes. Setting aside the negative impact of tariffs on economic growth, even if Trump were to carefully select the duties that maximize tariff revenue and impose tariff rates at a staggering 50 percent, tariffs would bring in only 40 percent of the revenue generated by current U.S. income taxes on individuals and corporations, according to analysts at the Peterson Institute for International Economics. The distortionary costs of such tariffs would be far greater. And this estimate ignores potential retaliation by trading partners, which could further slow U.S. economic growth by hurting........

© Foreign Affairs