Bessent claims tariffs aren't taxes

Treasury Department Secretary Scott Bessent insisted Thursday that tariff are not taxes, defying the widely accepted economic and financial definition of President Trump's top trade tool.

In an exchange about federal revenues coming from Trump’s trade policies, Sen. Catherine Cortez Masto (D-Nev.) pressed Bessent during a Senate Finance Committee hearing, during which the secretary repeated his position that tariffs are not a form of tax.

“Let me ask you this,” Cortez Masto said. “Do you think that tariffs are taxes?”

“Sorry?” Bessent said.

“Do you think that tariffs are taxes?” she repeated.

“No.”

“No, they’re not?” she asked again.

“No,” Bessent said again.

Tariffs are fees charged by the federal government to individuals or businesses who purchase and import certain goods from abroad according to rates set by Congress and the president.

While economists have squabbled over the impact and effectiveness of tariffs as a trade policy tool, there is little debate over whether they functionally serve as a tax.

U.S. Customs and Border Protection, the federal agency responsible for collecting tariffs, also refers to them as "duties" — another word for taxes — in reports on the revenue they generate.

Trump’s tariffs are expected to raise between $2.4 trillion and $2.8 trillion in federal revenues over the next decade, according to the Congressional Budget Office.

That’s about the same amount that Republicans’ domestic tax and spending cut bill would add to the U.S. deficit, something Republicans have recently touted, though Bessent told Cortez Masto the match was a “coincident, not causal.”

Trump has touted his tariffs for months as a major source of revenue to fund tax cuts for Americans. The president has even suggested in the past that revenues from tariffs could be used to replace the income tax.

“It’s possible we’ll do a complete tax cut,’’ Trump told reporters in April. “I think the tariffs will be enough to cut all of the income tax.’’

Economists have been highly skeptical of that idea.

“The individual income tax raises more than 27 times as much revenue as tariffs currently do,” Jesse Solis of the Tax Foundation wrote in an April analysis.

Businesses often say that tariffs are taxes that eventually end up being paid by customers after their cost is factored into prices. 

Businesses can also try to eat the cost of tariffs by taking them out of profit margins or adjusting their production schedules.

“A tariff almost always increases the cost of imported goods by the full amount of the tariff rate,” economic researchers with the Peterson Institute for International Economics wrote earlier this month. “The percentage increase in the marginal cost of each imported item increases by roughly the tariff rate.”