- Tariffs will replace income tax, said Trump in his 2026 State of the Union speech
- Supreme Court struck down key parts of Trump’s import duties in a 6-3 ruling
- Trump introduced a new 10 percent tariff, possibly rising to 15 percent soon
"Tariffs will replace income tax." That was US President Donald Trump's headline claim as he addressed a joint session of Congress during his 2026 State of the Union speech, days after the Supreme Court of the United States struck down several of his sweeping import duties.
Trump said that, over time, tariff revenue - which he argued is paid by foreign countries - could substantially replace the modern income tax system. He added that congressional action would not ultimately be necessary if collections grow large enough.
The renewed focus on trade policy comes as the United States prepares marks its 250th anniversary in 2026, commemorating the signing of the Declaration of Independence and reflecting on the country's economic direction.
Court Ruling and Swift Response
Last week, the Supreme Court ruled that Trump had exceeded his authority in imposing certain broad-based tariffs. Chief Justice John Roberts, along with Justices Amy Coney Barrett and Elena Kagan, joined a 6-3 majority against key elements of the policy.
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Trump described the verdict as "very unfortunate," yet insisted that most US trading partners want to preserve the agreements negotiated under his earlier tariff framework. He argued that the possibility of tougher new terms would encourage countries and corporations to continue along what he called a successful path.
Soon after the ruling, Trump introduced a fresh 10 percent tariff under a separate legal authority, effective Tuesday. He said the rate could be raised to 15 percent. The measure is set to last 150 days unless Congress extends it.
Economic Record in Focus
During his speech, Trump credited tariffs with driving what he called a historic economic turnaround, pointing to record highs in the Dow Jones and the S&P 500 during his tenure. He said the duties generated hundreds of billions of dollars and helped secure favourable trade and national security outcomes.
He also rejected warnings from economists who had forecast higher inflation and slower growth.
However, a recent paper from the New York Federal Reserve found that nearly 90 percent of the tariffs' economic burden fell on US firms and consumers, rather than foreign exporters.
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