Unfiltered Millennial

To kick off February 2025, Donald Trump signed an executive order to implement 25% across the board tariffs on Mexico and Canada as well as 10% across the board tariffs on China. An interesting exception to the 25% rate on Canada is that energy resources from Canada will only be tariffed at 10%.

The key question is: What is the goal of these tariffs? During the campaign, it was about lowering costs on Americans. President Trump falsely claimed that Americans wouldn’t pay the tariffs the countries would. This is misleading because, while foreign companies may pay the tariffs, they pass the cost on to U.S. consumers. According to a Princeton study, the tariffs on China imposed by Trump during his first term increased prices by approximately 10-30% on goods subject to the tariffs.

Over the weekend, the President shifted his reasoning, claiming the tariffs were necessary due to Canada, Mexico, and China’s contributions to America’s fentanyl and immigration crises. The Wall Street Journal editorial board called it “The dumbest trade war in history.”

In his first term, the Trump administration enacted various tariffs in the name of protecting the American worker and citing that countries like China have taken advantage of the United States for years.

Since his initial orders, the tariffs imposed on Mexico and Canada have been ‘paused’ temporarily after President Trump had conversations with leadership in both countries. The reality is that the administration has cited three different justifications for these tariffs, yet I argue that none of these seem to be the true reason.

Tariffs as a Revenue Generator

Tariffs have historically been talked about in the context of dissuading the purchase of foreign goods by adding a tax on the ability to bring that good into the country. While corporations are the ones who pay the tax, they pass those costs down to the consumer to protect their bottom line.

I propose an alternative explanation for the imposition of these tariffs. That is the back door of instituting a national sales tax. The administration ran on cutting income taxes, but without cutting spending to match which will be hard to do due to the makeup of the current Congress, they were going to have to find ways to raise revenues without going through Congress.

Republicans have long advocated for removing or significantly reducing our dependence on the income tax by instituting a national consumption tax, more regularly known as a sales tax. States and localities across the country implement sales taxes as a way to generate revenue for state and local services.

The problem with a sales tax? It is inherently regressive. Our current income tax is progressive. The logic behind this is that higher earners can contribute more without experiencing extreme financial strain. The sales tax would be a flat rate regardless of income or ability to pay therefore disproportionately affecting those who can least afford it.

I call tariffs a backdoor sales tax because the administration has far greater unilateral authority in imposing them, with Congress playing a more limited role. This allows the Trump administration to generate ‘sales tax’ revenue through tariffs, offsetting the cost of his proposed income tax cuts. According to the CATO Institute, the tariffs imposed in President Trump’s first term more than doubled tariff revenue for the United States from $33 billion in 2017 to $71 billion in 2019. In fact, those earlier tariffs were far more limited compared to what is being proposed today.

At a time when our poorest Americans are dealing with higher prices, the administration is implementing a workaround to raise prices even higher than they are already. Studies from both the Peterson Institute for International Economics and the Retail Industry Leaders Association pointed to the heavier burden placed on lower-income families. One of the primary reasons for that? Tariffs are commonly placed on goods deemed a necessity, and therefore, families that can barely afford it can’t stop buying them for sheer survival.

With the administration offering shifting justifications for these tariffs—from lowering costs for Americans to addressing immigration and fentanyl concerns—it’s worth questioning the true motive behind this trade war. While tariffs are often framed as a tool to protect American jobs, history shows that their costs largely fall on U.S. consumers, particularly lower-income families who can least afford price hikes.

Given the Republican Party’s long-standing opposition to the income tax and support for a national consumption tax, could these tariffs be a strategic step toward that goal? By unilaterally increasing tariffs, the administration is generating billions in revenue—functioning as a sales tax in everything but name.

If that’s the case, then this trade war isn’t just about foreign policy—it’s a backdoor shift in America’s tax structure, one that disproportionately burdens those who are already struggling.