As U.S. tariff policy drifts from negotiation tactic to fiscal mainstay, Oxford Economics warns that revenue, not reshoring, is driving its staying power. With duties now funding tax cuts, future administrations may find them hard to unwind.
Revenue Over Reshoring
Tariffs may have started as a tool to open markets and bring production home, but they’re proving most effective as a revenue stream. According to Oxford Economics, the U.S. administration’s 10% universal tariff, along with existing levies, has sharply increased customs revenue to 1.1% of GDP, up from 0.3% last year. That shift has made tariffs an appealing fiscal lever, especially as the One Big Beautiful Bill Act (OBBBA), signed July 4, adds pressure to finance large-scale tax cuts.
The July 2 Oxford report argues that this revenue stream is too valuable to walk away from. “Given the fiscal challenges that lie ahead, those revenues will be hard for future administrations to replace,” said deputy chief U.S. economist Michael Pearce in an official statement. Oxford forecasts that tariffs will generate $2.5 trillion in additional revenue over the next decade, offsetting a significant portion of the federal deficit triggered by recent policy.
However, tariffs are falling short in other areas. U.S. exporters are facing more, not fewer, barriers abroad, and uncertainty around future rates is limiting business investment in reshoring. “Added capital costs from tariffs on investment goods will limit the degree of reshoring in many industries,” Pearce noted.
Policy Drift and Legal Uncertainty
Trump’s April 2 “Liberation Day” tariffs, justified under emergency powers, have triggered fresh disputes with global trading partners and domestic industries. While tariffs of up to 40% are scheduled to hit imports from Japan, South Korea, and South Africa on August 1, enforcement has been repeatedly delayed, confusing supply chain planners and market analysts alike. So far, only the U.K. and Vietnam have reached preliminary trade agreements with the U.S., and both lack firm commitments.
At the same time, a legal challenge is working its way through the courts. On May 28, the U.S. Court of International Trade ruled that the President’s use of the International Emergency Economic Powers Act (IEEPA) may have exceeded its intended limits, temporarily halting key tariffs. That ruling was quickly overturned on appeal, allowing the duties to stay in place while the case proceeds, further adding to business uncertainty.
According to Oxford, the likely long-term outcome is a tariff system that prioritizes fiscal gains over strategic trade outcomes. The 10% universal tariff is expected to endure, as are higher duties on China, non-USMCA goods, and metals. While a renegotiation of USMCA could phase out many regional tariffs by 2026, most others appear embedded in the U.S. trade architecture for the foreseeable future.
When Revenue Incentives Undermine Trade Flexibility
As tariffs harden into a core revenue source, they risk reducing the U.S. government’s agility in responding to future trade shifts or economic shocks. What begins as a short-term fiscal offset could lock policymakers into a structure that’s difficult to reverse without triggering revenue shortfalls. For finance and sourcing teams, that means planning for a baseline of elevated import costs, not just during trade disputes, but as a persistent condition of doing business.
