One group that wasn’t so happy was the Committee for a Responsible Federal Budget (CRFB), a nonpartisan organization focusing on fiscal sustainability. While many both in the U.S. and abroad opposed Trump’s signature trade policy, his tariff regime had already brought in billions in government revenue, with trillions more baked into the fiscal accounting for the rest of Trump’s term and beyond. Those projected receipts evaporated on Friday, and as a result, America’s already dismal fiscal outlook suddenly deteriorated even further.
Other mechanisms were more novel. One option was to replace tariffs with a border adjustment tax, essentially a version of the value-added tax, or VAT, on goods that most of the world’s nations levy in some shape or form. While tariffs selectively penalize specific foreign imports, VAT levies treat all products equally and tend to have a neutral impact on trade.
But while many Americans might cheer the downgrading of Trump’s protective trade policies this week, the country’s fiscal outlook continues to darken. The bottom line, according to CRFB’s MacGuineas, is that the U.S. is in desperate need of either cash or savings to plug its gaping deficit. And right now, it’s getting none of either.
“We need Washington to put forward an agenda to truly address the debt. That means cutting spending, raising revenue, lowering health care costs, and securing our trust funds,” she said. “Whatever one feels about the tariffs themselves, the country needs that $2 trillion in fiscal improvements, all of which should be dedicated to deficit reduction.”
