Trump Aims to Eliminate Taxes for Americans Earning Under $200,000 with Revenue from Favorable Tariffs, Leverages U.S. Market Power in Trade Talks
President Donald Trump has proposed eliminating federal income taxes for Americans earning less than $200,000, aiming to fund the initiative with revenue from favorable trade agreements secured through tariff-driven negotiations.
2025-04-28 14:00:10 - VI News Staff
On April 27, Trump posted on Truth Social, “When Tariffs cut in, many people’s Income Taxes will be substantially reduced, maybe even completely eliminated. Focus will be on people making less than $200,000 a year.”
Leveraging the U.S.’s position as the world’s largest consumer market, the administration is using temporary high tariffs to spark trade talks with major partners, which the administration says has been proving to be effective.
Trump’s strategy centers on securing advantageous trade deals to generate tariff revenue, which would finance significant tax cuts. The administration initially imposed tariffs—10% on most imports, 145% on Chinese goods, 25% on Canada and Mexico, 20% on the European Union, and up to 49% on Southeast Asian nations—to pressure trading partners into negotiations. On April 6, aboard Air Force One, Trump stated, “Every country is calling us. That’s the beauty of what we do. We put ourselves in the driver’s seat. The tariffs give us great power to negotiate. They always have.” These negotiations aim to secure lower tariffs on U.S. exports, increased market access, or other concessions, with the resulting revenue supporting tax relief.
The Tax Policy Center estimates that tariff agreements could generate $3.3 trillion over a decade, though White House aide Peter Navarro has claimed up to $6–7 trillion. This revenue is intended to offset the cost of eliminating income taxes for individuals earning under $200,000, which could exceed $2 trillion annually, while also funding the extension of the 2017 Tax Cuts and Jobs Act (TCJA, $4.5 trillion over 10 years) and new tax breaks, such as eliminating taxes on tips, overtime pay, Social Security benefits, and introducing a deduction for auto loan interest.
Trump has suggested tariffs could reshape the tax system. In a February 2025 Fox News interview, Commerce Secretary Howard Lutnick relayed Trump’s vision, stating, “Donald Trump announced the External Revenue Service, and his goal is very simple: to abolish the Internal Revenue Service and let all the outsiders pay.” However, economists are skeptical.