Overview

This application simulates tariff revenue based on various economic parameters and assumptions. The simulator allows users to explore different scenarios by adjusting key parameters that affect estimated tariff collection and economic responses.

Model Parameters

Change in Tariff Rate: The proposed change in tariff rate on import values in percentage points.
Income/Payroll Offset: Reduction in revenue due to income/payroll tax effects.
Elasticity: Price elasticity of import demand.
Demand Growth: Annual growth rate of import demand in percentage points.
Import Data Base Year: Indicates the vintage of import data used to create forecasts.
Country: Country or region of interest. Currently, the simulator supports a global tariff or country-specific tariffs.

Methodology

Imports, before considering any behavioral responses induced by tariffs, are forecasted to grow at a constant rate from the base year,

$$V_t^* = V_0(1 + g)^{t-t_0},$$

where $V_t^*$ is the tariff-exclusive value of imports forecasted at time $t$, $g$ is the demand growth rate, and $t_0$ is the base year. The initial import value $V_0$ is estimated based on data from the US Census Bureau from year $t_0$ (see the following section for details).

Static tariff revenue (before any demand response) from the policy is:

$$R_t^{static} = \Delta \tau V_t^*$$

where $\Delta \tau$ is the change in tariff rate from the policy.

Demand Response

The model incorporates a behavioral response to price changes induced by tariffs governed by an import demand elasticity,

$$\epsilon = \frac{\Delta \ln V}{\Delta \ln P}$$

where $P$ is the tariff-inclusive price of imports. We assume that the tariff-exclusive price of imports is unaffected by the tariff change, implying $\Delta \ln P = \ln (1 + \Delta \tau)$.

We assume that the customs value of imports after behavioral responses induced by tariffs is:

$$V_t = V_t^* e^{\epsilon \ln (1 + \Delta \tau)}$$

Tariff Revenue

The change in federal revenue from the tariff policy after accounting for demand responses and the income/payroll offset $\beta $ is:

$$R_t = \Delta \tau V_t(1-\beta).$$

Data Sources

PWBM's income/payroll offset assumptions are based on projections from the Joint Committee on Taxation (JCT). CBO provides a useful overview of how this kind of offset is used in budget projections.

PWBM's import demand elasticity assumptions are based on research by Boehm, Levchenko, and Pandalai-Nayar (2023) on the dynamic response of import demand to price changes.

Import values are retrieved from the U.S. International Trade Commission (USITC) DataWeb API, providing detailed import for consumption data categorized by country and 8-digit Harmonized Tariff Schedule (HTS) codes.

Product coverage for Section 232 steel and aluminum tariffs is based on HTS codes published in Federal Register notices, specifically identifying steel, aluminum, and derivative products subject to trade measures.

Limitations and Caveats

The simulator provides a snapshot of tariff impacts. We apply a constant elasticity across all products and price levels and assume full pass-through of tariffs to consumers. It focuses on the direct relationship between tariffs and imports, and does not account for broader economic responses—such as factor prices, supply chain adjustments, or potential retaliatory dynamics.

References

Boehm, Christoph E., Andrei A. Levchenko, and Nitya Pandalai-Nayar. 2023. "The Long and Short (Run) of Trade Elasticities." American Economic Review 113 (4): 861–905

Federal Register. 2018. "Adjusting Imports of Steel into the United States." Proclamation 9705, "Adjusting Imports of Aluminum into the United States." Proclamation 9704, and "Adjusting Imports of Derivative Aluminum Articles and Derivative Steel Articles into the United States." Proclamation 9980

Joint Committee on Taxation. 2025. "Income And Payroll Tax Offsets To Changes In Excise Tax Revenues For 2025–2035." JCX-10-25