President Donald Trump\u2019s sweeping new tariffs are raking in unprecedented sums for the federal government\u2014so much, in fact, that a top budget watchdog says the revenue rivals the impact of creating a brand-new payroll tax or slashing the entire military budget by nearly one-fifth. (These are rough estimates, to be sure, conveyed to communicate the magnitude of the tariffs, not precise contributions to the budget.) But can these massive cash flows, already topping tens of billions monthly, truly put a dent in America\u2019s $37 trillion national debt?<\/p>\n
Actually, yes, according to the Committee for a Responsible Federal Budget (CRFB).<\/p>\n
Since his return to the White House, Trump has unleashed a wave of \u201creciprocal tariffs\u201d on almost every major U.S. trading partner. Roughly $25 billion was collected in July, the CRFB calculated, more than triple the amount from late last year, and surely a fraction of what forthcoming months will yield. The D.C.-based think tank estimates the tariffs will bring in an estimated\u00a0$1.3 trillion\u00a0of net new revenue through the end of Trump\u2019s current term and\u00a0$2.8 trillion\u00a0through 2034. That represents a $600 billion leap forward from the tariffs in effect as of May.<\/p>\n
For context, in fiscal 2025 so far, tariffs have accounted for 2.7% of all federal revenue\u2014more than double typical levels. Some analysts project that figure climbing as high as 5% if current policies remain in place.<\/p>\n Impact on the national debt<\/p>\n In theory, pouring $2.8 trillion from tariffs into the national coffers could markedly slow the growth of the federal debt. Congressional Budget Office figures and CRFB models suggest that, if kept permanent, Trump\u2019s tariff regime could reduce the deficit by up to $2.8 trillion in the next decade. \u201cThe recent tariff increases are likely to meaningfully reduce deficits if allowed to remain in effect or replaced on a pay-as-you-go\u2026basis,\u201d the CRFB wrote in its analysis.<\/p>\n Experts still caution the impact, though real, remains limited when compared to the sheer scale of the U.S. government\u2019s finances: a whopping $37 trillion. Even with historic tariff gains, these revenues represent only a fraction of total federal income\u2014nowhere near enough to replace income taxes or close the debt gap. In fact, during fiscal year 2025, income taxes and payroll taxes covered over three-quarters of federal revenue.<\/p>\n Then there\u2019s the question of who is really paying the price, or as Trump likes to put it, who is eating the tariffs. The government is getting revenue from whom, exactly?<\/p>\n Eating the tariffs<\/p>\n While Washington enjoys a flood of new revenue, the reality on the ground is more complex. Businesses typically pass the cost of tariffs through to consumers in the form of higher prices. Economic research shows the new tariffs function much like a regressive tax, hitting lower- and middle-income households particularly hard. The average family in the second-lowest income tier faced an annual cost increase of $1,700; those in the top income decile paid upwards of $8,100 more per year, according to Yale Budget Lab<\/a>.<\/p>\n Moreover, defense and infrastructure experts warn rising costs from tariffs may invite higher prices for critical hardware and components needed by the military and national security agencies. Tariffs \u201cmake it more expensive to meet national defense requirements,\u201d the Council on Foreign Relations wrote<\/a> in early July.<\/p>\n Trump floats \u2018tariff dividend checks\u2019\u2014but debt likely to grow<\/p>\n President Trump has floated the idea of distributing \u201ctariff dividend checks<\/a>\u201d to American families on top of debt-reduction promises. But most economists say the math doesn\u2019t quite add up: While the government is enjoying record-breaking revenues, those gains are still dwarfed by annual spending and existing commitments. Even under the most optimistic scenarios from the Trump administration and its budget watchdogs, tariffs will only slow\u2014not reverse\u2014the upward march of the national debt.<\/p>\n The CRFB is a respected bipartisan institution that dates back to 1981, with a board consistently made up of former members and directors of key budgetary, fiscal, and policy institutions, such as the Congressional Budget Office, the House and Senate Budget Committees, the Office of Management and Budget, and the Federal Reserve. The CRFB regularly produces analyses of government spending and debt and deficit trends, as well as the solvency of programs such as Social Security<\/a>.<\/p>\n The CRFB regularly advocated for reducing federal deficits and controlling the growth of national debt. It typically favors reforms to federal \u201centitlement\u201d programs and functions as a deficit hawk, which draws the ire of left-wing figures. For instance, Paul Krugman characterized it as a \u201cdeficit scold\u201d while he was still with the New York Times<\/a>.<\/p>\n For this story,\u00a0Fortune\u00a0used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.\u00a0<\/p>\n