United States President Donald Trump signed an executive order establishing reciprocal tariffs on trading partners and a 10% baseline tariff on all imports from all countries.
The reciprocal tariffs will be set at roughly half the rate that US trading partners impose on American goods, Trump said. For instance, if China currently applies a 67% tariff on US imports, the US will respond with a 34% tariff on Chinese products. Trump also announced a flat 25% tariff on all automobile imports.
Trump told the media that tariffs would return the country to economic prosperity seen in previous centuries:
“From 1789 to 1913, we were a tariff-backed nation. The United States was proportionately the wealthiest it has ever been. So wealthy, in fact, that in the 1880s, they established a commission to decide what they were going to do with the vast sums of money they were collecting.”
“Then, in 1913, for reasons unknown to mankind, they established the income tax so that citizens, rather than foreign countries, would start paying,” Trump said.
Full breakdown of reciprocal tariffs by country. Source: Cointelegraph
Trump presented the tariffs through the lens of economic protectionism and hinted at returning to the economic policies of the 19th century by using them to replace the income tax.
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Trump proposes eliminating federal income tax and replacing it with tariff revenue
Trump proposed the idea of abolishing the Internal Revenue Service (IRS) and funding the federal government exclusively through trade tariffs while still on the campaign trail in October 2024.
According to accounting automation company Dancing Numbers, Trump's plan could save each American taxpayer $134,809-$325,561 in taxes throughout their lives.
US President Donald Trump addresses the media about reciprocal trade tariffs at the April 2 press event. Source: Fox 4 Dallas
The higher range of the tax savings estimate will only occur if other wage-based taxes are eliminated at the state and municipal levels.
Commerce Secretary Howard Lutnick, who assumed office in February, also voiced support for replacing the IRS with the “External Revenue Service.”
Lutnick said that the US government cannot balance a budget yet consistently demands more from its citizens every year. Tariffs will also protect American workers and strengthen the US economy, he said.
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