Income Tax out, Import Tax in? Trump’s tariff torment rolls on

The TOI correspondent from Washington: In an exhaustive State of the Union address lasting nearly two hours on Tuesday night, US president Donald Trump issued a stark warning to America's trading partners: stick to the existing trade deals and continue negotiations along the established path, or face far harsher terms in any new agreements.

"Don't even think about ripping up what we've built," Trump declared from the House chamber podium, his voice booming with characteristic bravado in remarks aimed at the EU, India, and other nations that have agreed on framework deals. "Those deals are the best you'll ever get. Try for something new, and it'll be worse for you."






“The good news is that almost all countries and corporations want to keep the deal they already made. They know the legal power that I have to make a new deal could be far worse for them. They will continue to work along the same successful path we negotiated, or they will find the next chapter far more painful,” he warned.

The remarks early in his speech set the tone for an economically charged address that emphasised protectionism as the cornerstone of US prosperity, doubling down on tariffs as a multifaceted economic weapon as he asserted boldly that escalating tariffs on imports could eventually eliminate the need for federal income taxes.

"Imagine an America where hardworking folks keep every penny they earn, and we fund our great nation through smart tariffs on foreign goods," Trump proclaimed, eliciting cheers from Republican lawmakers who gave him multiple standing ovations for all his claims. He painted a vision of a tariff-driven revenue system that would "make America rich again" by shifting the tax burden to overseas competitors.

"As time goes by, I believe the tariffs paid for by foreign countries will, like in the past, substantially replace the modern-day system of income tax," Trump said. He framed the shift as a "liberation of the American worker," arguing that taxing imports rather than domestic labour would ignite a "Golden Age" of manufacturing.

While economists warn that such a shift would require a mathematical leap—tariffs currently provide only a fraction of the revenue generated by income taxes and the jury is still out on the return of manufacturing —the president remained undeterred, claiming a "stunning economic turnaround" and a Dow Jones index that recently cleared the 50,000 mark.

The tariff roadmap Trump referred to has been clouded by a landmark 6-3 Supreme Court ruling issued just four days ago, which struck down the administration’s use of emergency powers to bypass Congress on trade levies. There was palpable suspense in the chamber as Trump walked in for his address past four of the Supreme Court justices in attendance, including chief justice John Roberts and justices Amy Coney Barrett, conservatives who ruled against him.

The president offered a quick perfunctory handshake to them before labeling the ruling "very unfortunate" and "defective," early in his speech, signalling that the judiciary would not be the final word on his trade agenda.

He confirmed he has already pivoted to Section 122 of the Trade Act of 1974 to implement a new 15% global tariff surcharge. "Congressional action will not be necessary," he added, a line that drew thunderous applause from the Republican side and stone-faced silence from the black-robed jurists and Democrat lawmakers, many of whom boycotted the address.