Mark Zandi warns against relying on Trump-era tariffs for long-term revenue as recession risks rise

The U.S. federal government is currently collecting approximately $300 billion in annual revenue from tariffs imposed under Donald Trump’s administration. However, top economist Mark Zandi of Moody’s Analytics has warned that this income should not be treated as a stable or long-term funding source, especially as the economy faces the looming threat of a recession [1]. Tariffs, he noted, were enacted through executive orders and can be rescinded just as easily, making them highly vulnerable to political and economic pressures during downturns [1].

Zandi emphasized that when a recession inevitably hits—whether soon or in the future—the president of the day will likely face intense calls to reduce tariffs in order to ease the financial burden on consumers. These tariffs, often referred to as "import taxes," are largely passed on to American buyers, with Goldman Sachs estimating that around 67% of the costs are absorbed by consumers [1]. In times of economic distress, such a financial drag can become a significant political liability [1].

Furthermore, many of the tariffs currently in place are being challenged in court, with critics arguing that certain "reciprocal" tariffs fall outside the scope of the International Emergency Economic Powers Act [1]. This legal uncertainty adds another layer of risk for policymakers who might be tempted to rely on tariff revenue for budgetary planning [1].

Zandi also highlighted that while tariffs have generated a temporary fiscal windfall, they are not a viable solution for addressing the nation’s long-term fiscal challenges. For instance, the federal budget deficit is projected to expand to nearly $2 trillion in the current fiscal year, far exceeding the revenue generated by tariffs [1]. Relying on tariffs as a core revenue mechanism could exacerbate fiscal instability in the long run, particularly if economic conditions worsen [1].

The economist’s concerns are compounded by the broader economic landscape. More than half of the approximately 400 industries tracked by the government are already experiencing job losses, a trend that has historically preceded economic downturns [1]. Additionally, Zandi warned that the economy is currently on the brink of a recession, with no guarantee of long-term stability in the coming years [1].

While Trump has suggested using tariff revenue to fund consumer rebates or other forms of economic support, Zandi remains skeptical of such proposals. He argues that it is unrealistic to assume tariffs will consistently generate $300 billion annually over the next decade, given the political and economic volatility surrounding them [1].

In light of these uncertainties, Zandi urged policymakers to avoid making long-term fiscal or legislative decisions based on the assumption that tariffs will remain in place. Instead, he advocated for more sustainable and resilient economic strategies that can withstand the pressures of a recession [1].

Sources:

[1] When the next recession hits, whoever is president will... (https://fortune.com/2025/08/11/recession-trump-tariffs-cut-consumer-tax-relief-federal-revenue/)