On April 2, the President issued an executive order applying a 10 percent tariff on all imports into the U.S., along with additional “reciprocal” tariffs on specific countries, pursuant to the International Emergency Economic Powers Act (IEEPA). The President later announced a “pause” to the reciprocal tariffs, but the 10% “baseline” tariffs took effect on April 5, 2025. Research shows that consumers and companies inside the U.S. bear most of the added tax burden from tariffs.
Earlier this month, the non-partisan Peterson Institute released a report estimating that an across the board 10% tariff would raise at least $2.5 trillion dollars over the next ten years. That would represent a 300% increase in U.S. tax revenue from tariffs, aka “customs duties,” according to the U.S. Treasury Department, from $80 billion to $250 billion per year. This new tariff revenue will only do so much to offset the main sources of U.S. tax revenue: $2.43 trillion (49% of total federal tax revenue) from individual income taxes, $1.71 trillion (35%) from social security and Medicare taxes, $530 billion (11%) from corporate income taxes, and $100 billion (2%) from excise taxes. It nonetheless represents a significant increase in tax revenue.
How will these new taxes on imports affect food prices? According to USDA’s Economic Research Service, “agricultural products,” including “processed food and beverages, horticultural products, and livestock products, agricultural imports” account for $204 billion, or 6.3% of all imports by value, as of 2024. That figure has been increasing steadily for years, up from 4.3% in 2004, as Americans’ taste for foreign food has grown. So, if the $250 billion tariff revenue were spread evenly over all commodities, and food imports held steady, the tariffs would apply a nearly $16 billion annual tax on food.
This estimate could over- or underestimate the actual tax on food. On the one hand, the food industry and consumers may be able to substitute cheaper, domestically produced “agricultural products.” On the other hand, the Peterson model takes substitution effects into account, and there’s reason to believe that demand for at least some food imports, e.g. commodities like bananas and coffee that are almost exclusively grown outside of the U.S., are relatively “inelastic,” and so more tariff costs may be passed on in the price of those items.
Food price increases that took off during the pandemic have been famously “sticky,” coinciding with a rise in corporate profits and allegations of uncompetitive behavior. To its credit, the Department of Justice has opened an investigation into whether egg companies are colluding to charge higher prices. But with so much angst over food prices, why levy a nearly $16 billion tax on imported foods? With imported foods accounting for 32 percent of fresh vegetables, 55 percent of fresh fruit, and 94 percent of seafood eaten in the U.S., the tariffs will almost certainly undercut efforts to improve American diets, in line with the “Make America Healthy Again” agenda.
According to the White House, the tariffs counter “non-tariff barriers” that unfairly disadvantage U.S. producers. In particular, the Administration cites the example of European prohibitions on U.S. beef imports from cows treated with hormones, and on chickens processed with antimicrobial chemicals. However, polls indicate that large majorities of European consumers support these bans.
Rather than disrespecting consumer preferences abroad, the Administration could negotiate trade policies that favor U.S. producers by prioritizing U.S. consumer interests. One obvious example is country-of-origin labeling (COOL) for beef and pork. Congress required this labeling, and Canada and Mexico literally overruled it through the World Trade Organization in 2015. Eighty-nine percent (89%) of consumers favor requiring food sellers to indicate on the package label the country of origin of fresh meat they sell, and a bill reinstating COOL for beef and pork has attracted bipartisan congressional support.
Yet the first Trump Administration ignored COOL when it renegotiated trade agreements with Canada and Mexico, and the current Administration seems intent on doing the same. This lends credence to critics who allege that the tariffs are less about protecting U.S. industry, and more about corruption.
As Jonathan Chait wrote in The Atlantic this past February:
“During his first term, Trump levied broad tariffs and then entertained a parade of executives pleading for exemptions, which his administration doled out at its whim. The Office of the United States Trade Representative fielded more than 50,000 requests from domestic businesses for exceptions to the tariffs on Chinese goods alone, while the Commerce Department sifted through almost half a million waiver requests. Trump’s decisions were often arbitrary—Bibles got a tariff exception, on the apparent basis that their costs needed to stay low, but textbooks did not.”
As Chait points out, these exemptions heighten concerns about rampant conflicts of interest in the Administration, including what one ethics scholar has called “the single worst conflict of interest in the modern history of the presidency”—the President’s crypto currency exploits. It is not hard to imagine a receipt for an anonymous crypto contribution—perhaps shown to Eric Trump, or Commerce Secretary Howard Lutnick’s kids—securing a tariff exemption for a country or a company willing to “play ball.”
What’s to be done? The power to levy tariffs lies with Congress, according to the Constitution. Congress could take back the authority it has given to the President through legislation. However, members will need to overcome substantial fears of retaliation, including physical violence. In the meantime, expect to see higher prices at the grocery store.