Tax Foundation Proposes Value Added Tax to Replace Trump Era Tariffs

The Tax Foundation reported on October 7, 2026, that US policymakers should replace current tariff policy with a small value-added tax. The organization stated that a consumption tax would raise sustainable revenue while causing fewer economic distortions than import duties. [1]

According to the Tax Foundation, tariff revenue has more than tripled as a share of gross domestic product since President Donald Trump began increasing import taxes in 2018. However, the report noted that these revenues have proven unstable as new import duties were introduced. [1]

During his second presidential term, President Trump enacted steep tariffs on almost all imported goods. The overall average effective US tariff rate rose from 2.5 percent to an estimated 27 percent between January and April 2025. Following negotiations and court rulings, the average effective rate dropped to 12.1 percent by July 21, 2026. Metals, metal products, and vehicles were the items most affected by those measures. [3]

A value-added tax is a consumption tax assessed on the value added at each production and distribution stage. Unlike direct taxes, suppliers collect the tax from buyers at the point of sale and remit the funds to the government. [2]