This page provides more information about the methodologies TPC uses to analyze tariffs, including the rules engine and how TPC estimates the revenue and distributional effects of tariff policy. It also documents the policy and technical changes underlying TPC's tariff rules engine.

Visualizations of updated estimates can be found on TPC's tariff tracker.

Methodology

Tariff Rules Engine

The TPC Tariff Rules Engine determines the tariff rate applicable to each import that appears in historical US International Trade Commission (USITC) data. These rates are computed for each import daily, by policy. Each policy can apply a rate to an import that it covers. Coverage is determined by the following core parameters: the import's country of origin, HTS product code (at any detail level, up to 10-digit), and the policy's effective date(s). Parameters can be used to select or deselect imports and are obtained from Federal Register notices and White House announcements. Policies can also be encoded relationally to each other, meaning their coverage can be specified relative to another policy's coverage. For example, the Section 122 tariff applies to specific countries after a specific date, but only if the affected goods do not overlap with Section 232 tariffs. The total tariff rate on an import is the sum of the rates applied by all applicable policies. Overall, the rules engine estimates about 10 billion tariff rates.

Revenue Estimates

The revenue generated by tariffs is estimated by aggregating daily tariff rates for each import by fiscal year. TPC's Tariff Revenue Model uses the annual tariff rate on an import, the competitiveness of comparable domestic industries, and the duration of tariffs to determine behavioral adjustments, including the change in demand for that import. The annual tariff rate is then applied to the post-adjustment value of imports to obtain revenue generated by a policy. For reporting the total change in federal revenues, TPC applies a standard offset that accounts for a change in income and payroll taxes based on published estimates from the staff of the Joint Committee on Taxation.

Distributional Estimates

TPC assumes that tariffs on imported goods are fully passed through domestically, consistent with substantial evidence on import taxes (see USITC; HBS Pricing Lab; Gopinath and Neiman). TPC’s Tariff Supply Chain Model characterizes the relationship between goods in the economy, which is used to map the burden on imported goods to final goods and services. For example, that model can distribute tariffs levied on intermediate goods (e.g., steel) to final goods (e.g., buildings). The more a final good uses imported intermediate goods, the more tariff burden is reflected in the final cost. The supply chain model adapts the Bureau of Economic Analysis's Input-Output (I-O) framework. The burden from changes in tariffs is evaluated at pre-policy quantities (i.e., before changes in demand and other behavioral adjustments) and therefore differs from revenue collected, similar to how TPC distributes changes in other federal taxes. Results from the supply chain model can be used to analyze the impact of tariffs on specific goods or industries, and to distribute tariffs to households.

Distributing Burden to Tax Units

TPC allocates tariffs to tax units in the same way it models excise taxes such as gasoline taxes. Specifically, it distributes the burden based on the income sources and consumption baskets of tax units in TPC's large-scale microsimulation model. Burden in a given year is distributed to tax units based on their share of affected income sources and an adjustment for their relative consumption of taxed and untaxed goods. Price increases are relative in the sense that aggregate price level and nominal incomes do not change, consistent with conventional scoring assumptions.

Release Notes

Tariff Rules Engine v1.6

• Incorporates the following new policies:
  • Revised Section 232 metal tariffs, which encompasses steel, aluminum, and copper, starting April 6, 2026.
    • The rate on raw steel, aluminum, and copper (and their "full" derivatives, e.g., aluminum doors) remain at 50 percent.
    • Derivative products that partially contain the metals are no longer levied based on the value of their metal content. In lieu, a list of "half" derivatives (e.g., air-conditioner parts) are levied at a rate of 25 percent.
    • UK-origin imports face preferential rates: raw metals and full derivatives are levied at 25 percent, while half derivatives are levied at 15 percent.
    • Half derivatives that are used for motorcycle manufacturing are exempt from these tariffs.
    • A subset of half derivatives (e.g., loading machines) will face a sliding-scale 15 percent rate. That means if its MFN rate is below 15 percent, the additional tariff will make up the difference; if above, no additional tariff applies. This treatment lasts through 2027, after which these half derivatives will be levied at 25 percent. For countries without normal trading relations (i.e., Belarus, Cuba, North Korea, and Russia), this preferential rate will be 25 percent.
    • Further preferential rates apply to derivatives if they are produced with US-origin metals. TPC does not model these provisions due to a lack of data. If importers comply with these conditions, we expect further revenue loss from these new metal tariffs.
    • The rate on Russian-origin aluminum remains at 200 percent; derivatives are levied using the previous Section 232 aluminum tariff regime.
  • New Section 232 pharmaceutical tariffs:
    • Patented pharmaceuticals face sliding-scale 100 percent rate. (This rate does not apply to countries without normal trading relations to the US.) The most imported covered products include peptides, vaccines, sedatives, and insulin.
    • For trading partners with implemented trade deals (i.e., European Union, Japan, South Korea, and Switzerland and Liechtenstein), the rate will be a sliding-scale 15 percent. For the UK specifically, it is 10 percent.
    • Products of drug manufacturers that have signed both a reshoring deal and a so-called Most-Favored Nation (MFN) pricing deal are exempt from tariffs. ("MFN pricing" is unrelated to MFN tariffs.) TPC models the share of imported drugs covered using the global market share of these manufacturers. This treatment is in effect through January 19, 2029.
    • If a drug manufacturer has signed a reshoring deal only (there appears to be one company for which this applies, Regeneron), then a preferential 20 percent rate applies. After the previous exemption ends, imports made by other signatories will face this treatment. This treatment lasts through April 2, 2030, after which the 100 percent rate applies.
    • If multiple rates apply, the proclamation instructs that the lowest one be levied. Thus, the 100 percent and 20 percent provisions are never binding for imports from the aforementioned trade deal countries.
    • Both generic drugs and an "Annex IV" drug list (e.g., antibody tests, antidepressants) will face a rate of 0 percent. Products that face a Section 232 tariff (even at 0 percent) are exempt from Section 122 tariffs. (Annex IV significantly overlaps with the "Annex II" list that defines goods exempted from Section 122 tariffs.)
    • The start date for these policies is not entirely clear across documents. TPC follows the language in the president's proclamation and assumes company-specific provisions take effect first. Specifically, we assume headings 9903.04.61, 9903.04.63, and 9903.04.64 take effect on July 31, 2026 and apply to the 17 drug manufacturers with deals. We assume exemptions for generics and Annex IV take effect at the same time. Since heading 9903.04.61 applies no additional tariff rate, we assume this heading supersedes 9903.04.63 and 9903.04.64 until it expires on September 29, 2026, when other rate-applying headings also take effect. In effect, rates on pharmaceuticals do not increase until September 29, 2026. We will update our estimates as the language is clarified.
• Fixes a 200 percent tariff on Russian aluminum that did not apply for an interval in 2025-26.
• Significantly improves computational speed (by about 10x) with memoization of tariff rates on days with policy changes.

Tariff Rules Engine v1.5

• Disables the unimplemented Agreements on Reciprocal Trade with Argentina, Bangladesh, El Salvador, Guatemala, Indonesia, Malaysia, and Taiwan. This change slightly increases pre-ruling tariff levels.

Tariff Rules Engine v1.4

• Incorporates the following new policies:
  • Overturning of all IEEPA tariffs starting February 20, 2026.
  • Section 122 tariff of 10 percent on all goods, except exempted goods, from February 24 through July 23, 2026. Section 122 tariffs do not apply to goods in "Annex II" of the associated order, goods under Section 232 tariffs, informational materials, Chapter 98 goods, and goods implicating the United States-Mexico-Canada Agreement (USMCA) or Dominican Republic-Central America Free Trade Agreement (CAFTA-DR).
  • Trade agreements with Argentina, Bangladesh, El Salvador, Guatemala, and Indonesia that would have reduced the now-overturned reciprocal IEEPA tariffs.
  • The termination (starting February 7, 2026) of India's IEEPA tariff relating to the import of Russian oil.

Tariff Rules Engine v1.3

• Incorporates the following new policies:
  • The Section 232 tariff on semiconductors intended for re-export (HTS heading 9903.79.01). It takes effect on January 15, 2026.
• Improves the handling of interactions when a tariff applies only partially. This fixes an issue of the "Annex II" list (9903.01.32) not applying to European patented pharmaceuticals.
• No longer exempts goods under Section 232 investigation from reciprocal tariffs, unless they are added into Annex II.

Tariff Rules Engine v1.2

• Incorporates the following new policies:
  • The “Tariff-Related Elements of the Framework for a United States-Switzerland-Liechtenstein Agreement on Fair, Balanced, and Reciprocal Trade,” whose details were released on December 18, 2025. The policy retroactively applies to imports since November 14, 2025.
  • The scheduled increase of Section 232 tariffs on upholstered wooden furniture and wooden cabinets is delayed till 2027.
  • Section 301 tariffs on most Nicaraguan-origin imports (starting 2027) that do not implicate the Dominican Republic-Central America Free Trade Agreement.
• Improves the treatment of patented pharmaceutical imports when their generic counterpart is not subject to reciprocal tariffs.

Tariff Rules Engine v1.1

• Incorporates the U.S.-Korea Strategic Trade and Investment Deal, whose details were released on December 4, 2025. The policy retroactively applies to imports since November 14, 2025.
• Adds support for:
  • Section 201 tariffs on solar cells and modules.
  • Section 301 exclusions under HTS heading 9903.88.70.
  • IEEPA exceptions under 9903.01.86 for India.
  • IEEPA exceptions to informational materials.
• Applies exceptions under HTS heading 9903.02.76 to Section 232 aluminum, steel, and copper tariffs.
• Includes eight previously unaccounted product codes for steel and aluminum tariffs.
• Improves rate aggregation for fiscal year 2027.