Import Tariffs and the Market for Vehicles

Vehicle import tariffs can have measurable impacts on the market for vehicles. Depending on how they are structured, tariffs increase the cost of importing vehicles and vehicle parts, affecting how manufacturers price their vehicles across their entire fleet. Price changes affect consumer choices, but the extent depends on consumer price sensitivity and the substitutability of tariff-affected vehicles and other options. In 2025, the Trump administration levied 25 percent tariffs on vehicles and vehicle parts imported from outside North America. In this report, we leverage a structural econometric model of the vehicle market to quantify the impact of these tariffs on outcomes including vehicle prices, demand, domestic manufacturing, tariff revenues, manufacturer profits, and consumer well-being. These tariffs distort the market, increasing vehicle prices and reducing demand for new vehicles. Moreover, the tariffs would reduce manufacturer profits, though depending on the structure of the tariffs, US-based manufacturers may profit to some extent. However, the costs to consumers far exceed the benefits to domestic manufacturers and the revenues collected by the government.

On March 26, 2025, President Trump imposed a 25 percent tariff on automobile imports and key inputs to the assembly of vehicles—including engines, transmissions, powertrain parts, and electrical components. These tariffs were followed by a much broader set of tariffs on imports from all countries outside of North America, announced on April 2. Though country-specific tariffs were imposed for most goods (then subsequently paused on April 9 for 90 days), as of this writing, vehicles and the materials used to assemble vehicles remained subject to the pre-established 25 percent import tariff (with some exceptions). The rationale expressed by the government in imposing these tariffs was to ramp up domestic manufacturing and raise revenues for the federal government, with news sources stating that the White House expects the auto tariffs to produce $100 billion in federal revenues. See https://apnews.com/article/autos-tariffs-trump-tax-imports-ford-gm-e53823ef7bbb7b3c46d11eca90aaa638.

Importantly, these new tariffs would affect the entire supply chain because, even for vehicles assembled in the United States, most of them include imported vehicle parts. On average, over half of the materials (by value) required to assemble a vehicle in the United States are imported, though the amount ranges significantly across manufacturers, models, and vehicle fuel type (electric vehicles (EVs) tend to include more imported materials, in large part due to limited domestic battery supply chains; in this report, we define EVs as including battery electric and plug-in hybrid vehicles). For example, though both vehicles are assembled in the United States, Honda’s CR-V FWD is made with 15 percent materials imported from Japan, while the CRV e-FCEV contains 65 percent of its materials from Japan. See https://www.nhtsa.gov/sites/nhtsa.gov/files/2025-02/MY2025-AALA-Alphabetical-2.4.25.pdf.

Although some analysts have estimated how the tariffs would affect vehicle prices and how much revenue they would raise, some big questions remain: will the tariffs boost domestic vehicle production and producers’ profits, and how will the tariff revenue compare with the harm to vehicle consumers from paying higher prices? This report presents the results of using Resources for the Future’s Vehicle Market Model to answer those questions.

We find that a 25 percent tariff on vehicle imports and parts produced outside North America would generate revenue of about $39 billion (2024 US$) per year, far less than the White House predicts (the shortfall likely occurs because of reduced vehicle sales). The tariffs would increase average vehicle prices by about $3,500 per vehicle, and they would reduce imports by 1.3 million units while increasing domestic production by about 340,000 units (higher average prices cause total vehicle sales to drop by about 1 million units). Yearly profits of US-based producers (such as Ford, General Motors, Stellantis, and Tesla) would increase by about $8.5 billion, while profits of foreign producers would decline by about $26 billion.

Consumer well-being (as approximated by the difference in what consumers would be willing to pay and the price—what economists term consumer welfare) would decline by about $59 billion per year. This drop in consumer well-being reflects not just the higher prices consumers face, but also a decrease in benefits consumers receive from purchasing vehicles; specifically, the tariffs cause consumers to shift their purchases to less-desirable vehicles and/or avoid buying a new vehicle altogether. These consumer costs are far greater (in magnitude) than the tariff revenue, indicating how much these tariffs would distort the market. Costs to consumers also exceed the increase in US firm profits by $50 billion, which represents the net loss to US welfare.

The above findings reflect the fact that vehicles and parts imported from Mexico and Canada are currently exempt from the tariffs, yet changes to the current tariff policy would have significant impacts on outcomes. Imposing tariffs on Mexican and Canadian imported vehicles and parts raises tariff revenue to $64 billion, but it harms US-based vehicle producers. Rather than seeing profits increase, US-based vehicle producers’ profits would decrease by $7.7 billion per year because of their reliance on parts produced in Canada and Mexico. It also causes significant decreases in vehicle purchases and much higher impacts on vehicle prices. We note that the tariffs have been in a state of flux, and the chosen scenarios represent variations in how the administration may handle tariffs on imported parts.

Several industry and consultancy estimates of auto tariff impacts are available, but it is unclear what underlying assumptions and models were used to calculate these impacts, as little to no detail is provided with the reported estimates. Industry analysts have estimated that the tariffs could result in average vehicle price increases of $3,000 to $10,000. See https://abc7news.com/post/car-tariffs-no-problem-heres-how-get-best-deal-amid-president-donald-trumps-looming/16112125/. Cox Automotive expects prices of tariffed vehicles to increase by 10–15 percent See https://www.coxautoinc.com/market-insights/new-auto-tariffs-are-now-in-place-driving-the-industry-into-uncharted-territory/., with prices of vehicles not subject to tariffs also increasing by 5 percent. The Anderson Economic Group consulting firm estimates that prices could increase between $2,500 to $20,000 (with the higher range on imported vehicles), costing consumers $30 billion in the first year. See https://www.andersoneconomicgroup.com/tariffs-economic-impact-on-auto-industry/. JP Morgan estimates that vehicle prices could rise by 11.4 percent under a specific scenario. See https://www.jpmorgan.com/insights/global-research/current-events/us-tariffs.

Yale’s Budget Lab estimates that the vehicle tariffs would increase vehicle prices by $6,400. See https://budgetlab.yale.edu/research/fiscal-economic-and-distributional-effects-25-auto-tariffs. This analysis used the Global Trade Analysis Project (GTAP) to estimate trade flow changes, and the Bureau of Economic Analysis’ input-output and import requirement matrices to estimate price changes. Importantly, unlike our model, this analysis does not account for strategic behavior by vehicle manufacturers, nor the resulting change in consumer choices.

The Federal Reserve Bank of Richmond estimates that the tariffs will be completely passed through to customers. See https://www.richmondfed.org/publications/research/economic_brief/2025/eb_25-12. They also do not directly estimate the impact on prices.

Importantly, these assessments do not attempt to understand the impact of the tariffs on a wide range of outcomes that affect the vehicle market. For example, they do not estimate impacts on US and non-US manufacturer profits or how tariff revenues compare to consumer wellbeing and producer profit changes. Furthermore, they ignore the fact that manufacturers make strategic pricing decisions in light of differences in consumer price responsiveness across vehicle models and fuel types—which will have complex impacts on the demand and price of vehicles regardless of their fuel type or country of origin.

These industry analyses provide a sense of the vehicle price changes we may see in the near term. But to understand how the industry will be affected in all its dimensions, it’s important to understand a few key issues about how the vehicle market works, including the structure of the market, preferences and price sensitivity across vehicle buyers, the extent to which materials and vehicles are imported, and how readily buyers switch between gasoline and electric vehicles.

3.1. Market Structure, Consumer Preferences, and Price Sensitivity

The vehicle supply market functions as an oligopoly, meaning these manufacturers possess a certain degree of market power due to the limited number of manufacturers in the market. The ability of manufacturers to pass through tariffs to vehicle prices depends on the price sensitivity of consumers. Furthermore, when they choose prices, manufacturers account for how the prices of each of their vehicles affect consumer demand for their other vehicles.

Importantly, this price responsiveness will vary with several factors. For example, consumer income: wealthier vehicle buyers will be more willing to purchase vehicles at higher prices than lower income vehicle buyers. Because the vehicles that wealthy individuals purchase differ from the vehicles purchased by lower income buyers, the amount that these tariffs are passed through to the consumer will depend on the type of vehicle. Luxury vehicles will see higher price increases, while budget vehicles will likely see much lower price increases.

The effect of tariffs on prices also depends on the substitutability across vehicles. For example, if tariffs cause a manufacturer to raise the price of an imported vehicle, customers who would have purchased that vehicle without the tariff would be more likely to purchase a domestic vehicle if it is considered a close substitute. This substitutability is a key factor in how prices will be set across vehicle types (including car/van/SUV and gasoline/electric), domestic vs imported, and new vs used.

Furthermore, when this responsiveness leads consumers to purchase different vehicles, these alternative vehicles could also see price increases due to increases in demand (though less than that of the vehicles subject to higher tariffs).

3.2. Material and Vehicle Imports

Manufacturers who sell vehicles in the United States tend to offer a blend of vehicles that are imported and manufactured domestically. Similarly, for vehicles that are assembled in the United States, most manufacturers import at least some of their materials. On average, around 50 percent of the value of the vehicle is imported. However, there are some manufacturers (such as Tesla) who only import materials from Mexico or Canada (both countries are currently exempt from these 25 percent tariffs).

When vehicle imports are subject to a tariff, manufacturers who both import and produce domestically could ramp up domestic production while reducing imports. This means that those who have a greater domestic presence increase their vehicle prices by less and will also likely ramp up production in response.

However, in the short run—which may span a few years—manufacturers are likely to have a hard time sourcing materials from domestic suppliers given the limited existing domestic manufacturing base. In the longer term, new manufacturing plants could emerge, particularly if investors have certainty about the tariffs. Yet, without an established manufacturing base in the United States, tariffs will mean that vehicle manufacturers will face challenges in finding suppliers that can avoid the 25 percent import tariff, and thus will pay more on their products currently imported. These challenges likely explain why many manufacturers have been lobbying the administration for tariff relief.

3.3. From Gasoline to Electric Vehicles

The prices of gasoline and electric vehicles will also likely be affected in different ways. For example, EVs have a higher share of imported materials than gasoline vehicles. Because many of the EVs sold in this country use batteries imported from Asia, the value of tariff-applicable materials in EVs tends to be higher. According to data from the National Highway Traffic Safety Administration (NHTSA), about 65 percent (by value) of the materials in EVs is imported See https://www.nhtsa.gov/sites/nhtsa.gov/files/2025-02/MY2025-AALA-Alphabetical-2.4.25.pdf. , which is about ten percentage points more than gasoline vehicles.

Given an increase in prices for imported vehicles, manufacturers may choose to ramp up domestic production, yet the ability to do so will vary across gasoline and electric vehicles. For example, Tesla produces all of its vehicles in the United States; thus, an increase in imported gasoline vehicle prices could lead to more buyers purchasing their vehicles. However, given the limited capacity that currently exists to domestically produce batteries and the minerals they require, placing tariffs on vehicle parts would have a further increase in the cost of EVs assembled in the United States.

Above and beyond vehicle prices, understanding how these tariffs affect outcomes such as tariff revenues, consumer welfare, manufacturer profitability, and vehicle manufacturing is fundamental to assessing the wide-ranging impacts of vehicle tariffs.

4.1. Consumer Welfare and Tariff Revenues

One of the challenges with tariffs is that all vehicle buyers will be worse off from a welfare perspective. For imported vehicles, prices will rise. Individuals who continue to purchase an imported vehicle will pay more for the same product, and those who shift to a domestic vehicle are also made worse off for two reasons. First, in the absence of import tariffs, consumers who prefer imported vehicles would not have chosen a domestic vehicle; thus, the substituted domestic vehicle provides consumers with fewer benefits than the imported vehicle would have. Second, import tariffs can increase prices on all vehicles, including non-imported vehicles (due to shifting purchasing patterns and the potential for increasing demand to cause domestic vehicle prices to rise); thus, individuals who now purchase domestic vehicles will not just be worse off due to having to purchase their less-preferred vehicle, they may now also be paying more for it than in the absence of a tariff.

The magnitude of the tariff revenues collected on vehicles and parts imported will depend on the level of demand for vehicles subject to the tariff and the tariff rate. As consumers shift towards domestic vehicles and vehicles produced with a greater percentage of domestic parts, this will reduce the amount of tariff revenues raised. For simplicity and given the short-term aspect of our results, we do not assume any tariff revenues are refunded back to households.

4.2. Manufacturer Profitability

The profits accrued by manufacturers under different tariff scenarios will depend on how consumers respond to changes in prices. For vehicles that face lower price responsiveness, either due to a higher income group purchasing them, or those that have fewer close substitutes, manufacturers will be able to pass through greater amounts of the tariff, thereby reducing the negative impact on their profits.

In the case of domestically produced vehicles that are not subject to a tariff, manufacturers may see profit increases as consumers shift away from imported vehicles—both due to higher vehicle sales, and manufacturers’ ability to strategically increase the price of their vehicles.

To understand how these tariffs will affect the vehicle industry, we leverage a model of the vehicle sector in the United States. This model See https://www.rff.org/topics/data-and-decision-tools/rff-vehicle-market-model/. , developed by Resources for the Future, provides insights into how suppliers and consumers respond to changes in federal and state policies. For example, the model has been used to estimate the impact of federal vehicle emissions and efficiency standards on EV adoption, prices, emissions, and more. See https://www.rff.org/publications/reports/how-would-the-proposed-epa-passenger-vehicle-greenhouse-gas-emissions-standards-affect-new-vehicle-consumers/.

In this report, we use the model to demonstrate the short-term impact of these tariffs on gasoline and EV sales and prices, producer profits, consumer wellbeing, and tariff revenue. Two key policy design choices include whether to place tariffs only on assembled vehicles or on vehicles and parts, and whether to place tariffs on parts and vehicles produced in Canada and Mexico. To assess the implications of these choices, we model three tariff scenarios: 1) only imported vehicles face 25 percent tariffs; 2) imported vehicles and imported vehicle parts from non-North American countries face 25 percent tariffs (the current situation, as of the time of writing this article); and 3) imported vehicles and imported vehicle parts face 25 percent tariffs, regardless of the country of origin. We describe the tariffs as increasing in stringency from Scenarios 1 to 3, which reflects how broadly they apply to vehicles sold in the United States. These three scenarios are compared to a no-tariff baseline See Appendix Table A1 for baseline results. that includes existing policies that affect the vehicle market, such as federal greenhouse gas standards and Inflation Reduction Act (IRA) vehicle production and purchase subsidies.

For the baseline and policy scenarios, the model predicts sales and prices of new and used vehicles, as well as manufacturer profits, consumer wellbeing (or welfare), and tariff revenue. The next section reports the modeling results. Baseline results can be viewed in the appendix of this report.

Changes in vehicle prices across models and fuel types will have important implications for household budgets (and, more broadly, consumer welfare) and revenues collected by tariffs. Though manufacturing may adjust over time, quantifying the impact of these tariffs in the short run will be key to providing information for policymakers and households alike.

6.1. Vehicle Sales

As explained above, we expect the tariffs to raise vehicle prices, reducing overall consumer demand for new vehicles and sales. Across all three scenarios, the tariffs sharply reduce the total number of vehicles sold per year. Figure 1 shows, for each scenario, the change in vehicle sales in million units compared to the no-tariff baseline (with percentage changes reported as well). These results demonstrate that vehicle sales decrease across all scenarios, with the most stringent tariff scenario reducing sales by 1.7 million, or 10.5 percent.

Figure 2 demonstrates these results by fuel type. Here we show that gasoline vehicle sales decline by more, in number of units sold and as a percentage of baseline sales, compared to electric vehicles. Scenario 3 imposes the largest overall tariffs, and it reduces gasoline vehicle sales by the most: 1.6 million units.

6.2. Vehicle Prices

As expected, the tariffs broadly increase vehicle prices for two reasons: 1) they increase the cost of supplying vehicles to the US market, and 2) they shift consumer demand to vehicles that face lower tariffs, which in turn, can raise the prices on those vehicles. The magnitude of the overall price change is positively correlated with the tariff amounts. Figure 3 shows that average prices increase by about 4–11 percent, or $2,000 to $5,000 per vehicle. However, as expected, we find that imported vehicles see the greatest price increases, increasing by $8,800 (or almost 19 percent) under the most stringent tariff scenario (Figure 4). Domestic vehicle prices increase by a negligible amount in Scenario 1, where they are not subject to tariffs, but they increase in the other scenarios—both because the tariffs increase the cost of producing domestic vehicles and because the tariffs shift demand from imported to domestic vehicles.

Figure 5 shows how these price changes differ across fuel types. For gasoline vehicles, prices increase with the stringency of the tariff, regardless of vehicle origin. The largest price increases are for imported gasoline vehicles, which see average increases of almost $9,500 under Scenario 3. Prices of imported gasoline vehicles increase more when the tariffs apply to domestic vehicles in Scenarios 2 and 3 compared to Scenario 1, as in these scenarios, producers of imported gasoline vehicles are able to pass along more of the tariff to consumers when the tariffs apply to domestic vehicles as well.

For EVs, likely due to battery imports coming from Korea and Japan, domestic EV prices increase significantly when vehicle parts coming from outside of North America face tariffs (Scenarios 2 and 3). However, unlike for imported gasoline vehicles, prices of imported EVs increase by similar amounts across the three scenarios. This is likely because consumer demand for imported EVs is relatively price sensitive, giving importers limited opportunity to increase prices when consumer demand shifts away from domestic EVs.

6.3. Vehicle Production and Imports

We next look at how the tariffs affect vehicle production and imports. For EVs, Figure 6 demonstrates that when the tariffs apply to imported vehicle parts (Scenarios 2 and 3), consumer demand shifts from domestic to imported EVs, resulting in a larger reduction in domestic EV production relative to imported EVs.

For gasoline vehicles (Figure 7), the story is a bit different. Under the first two tariff scenarios, gasoline vehicle sales increase as consumers shift away from imports and towards domestically produced vehicles. However, in the most stringent tariff scenario that applies to parts produced in Canada and Mexico, domestic gasoline vehicle production decreases as well, yet we do not see a shift towards imports. Rather, consumers who purchase domestic gasoline vehicles shift into the used vehicle market, resulting in no change of imported gasoline vehicle sales across scenarios (i.e., the green bars are all the same length).

6.4. Manufacturer Profits

These tariffs substantially reduce yearly profits of non-US firms. The firms identified as US-based include General Motors, Ford, Stellantis and Tesla. For Scenarios 1 and 2, the tariffs benefit US firms by shifting consumer demand toward these vehicles, which entirely or largely avoid the tariffs (Figure 8). In both scenarios, domestic firms capture a larger share of the market, thus increasing their profits. Furthermore, the increase in price in Scenario 2 (Figure 4) also contributes to an increase in profits for US firms (note that the increase in price is higher than the tariff collected Calculated by dividing the total tariff revenues by the number of vehicles subject to the tariff. on these vehicles; see Figure 10).

However, imposing tariffs on all parts produced outside the United States, including from Canada and Mexico (Scenario 3) reduces profits of US firms by $7.74 billion. Their profits fall because they rely so heavily on parts imported from Canada and Mexico, which would then be subject to the tariffs in Scenario 3.

6.5. Tariff Revenue

The federal government would collect between $16.5 billion and $64.3 billion, depending on the stringency of the tariff scenario (Figure 9). Though the average tariff per vehicle ranges between approximately $2,000 and $5,000, the amount of the tariff collected from EVs is almost twice that collected from gasoline vehicles (Figure 10). This is mostly due to the higher retail prices and production costs of EVs, compared to gasoline vehicles.

6.6. Consumer Welfare

Our model demonstrates that the tariffs harm consumers, regardless of their stringency. In the most stringent scenario, consumer welfare decreases by almost $97 billion per year (Figure 11). Importantly, the loss in consumer welfare is larger than the total tariff collected, due to the fact that the tariffs lead consumers to buy less desirable vehicles, thereby reducing the benefits they receive from their vehicles.

7.1. Scenario 1: 25 Percent Tariff on Non-North American Vehicle Imports

Imposing the 25 percent tariff on imported vehicles but not parts (the tariff structure in place pre-May 3, 2025) reduces total vehicle sales by 430,000 units per year, with similar proportional decreases for gasoline and electric vehicles. On average, vehicle prices increase by approximately $2,000, though this average is primarily due to a $6,000 increase in the average price of imported vehicles, with imported gasoline vehicle prices seeing even larger impacts. Importantly, domestic vehicle prices do not increase meaningfully, regardless of fuel type.

The tariffs benefit domestic producers, which are dominated by the four US-based firms. The manufacturing of domestic gasoline vehicles increases significantly, while imports of gasoline and electric vehicles decrease. Given price changes and changes in vehicle demand, the impact on manufacturer profits also varies with the vehicle origin, with profits of US-based manufacturers increasing by almost $4 billion per year, whereas total profits across all firms decrease by approximately $8.4 billion.

Finally, the government would collect about $16.5 billion in tariff revenues per year, though consumer welfare would decrease by almost $29 billion, far exceeding the tariff revenue and the benefits to domestic producers.

7.2. Scenario 2: 25 Percent Tariff on Non-North American Imports and Parts

In the setting of a 25 percent tariff on imported vehicles paired with a 25 percent tariff on imported vehicle parts not originating in Canada or Mexico (which is slated to go into effect May 3, 2025), the demand for vehicles drops by 960,000 units per year—more than twice as much as in Scenario 1—with gasoline vehicles accounting for 96 percent of that decrease.

The price changes in this scenario are more complex than in Scenario 1, as all vehicles (regardless of where they are assembled) see large increases in price. On average, prices increase by $3,500, but in this case, EV prices go up by $1,650 and $3,000 for domestic and imported vehicles, respectively. Gasoline vehicles are affected even more, with domestic and imported vehicles increasing by $3,000 and $7,000 respectively.

The effects of these tariffs on domestic production and imports are qualitatively similar to Scenario 1. Compared to Scenario 1, these tariffs reduce domestic gasoline vehicle manufacturing, as the tariffs raise production costs of those vehicles. The broader tariffs in Scenario 2 also cause a greater drop in total manufacturer profits, mostly because the higher vehicle prices cause consumers to choose used vehicles instead of new ones.

Finally, these tariffs would result in almost $39 billion in yearly government revenues but would harm consumers by almost $59 billion. Note that the difference in tariff revenues and consumer welfare is larger in this scenario than in Scenario 1, due to the larger distortions in consumer behavior caused by the tariffs (more shifting to the used vehicle market, for example).

7.3. Scenario 3: 25 Percent Tariffs on All Vehicle Imports and Parts

The most stringent tariff scenario, in which all imported vehicles and vehicle parts are taxed at 25 percent, regardless of country of origin, imposes the largest costs on vehicle consumers and producers. In Scenario 3, new vehicle sales decrease by 1.66 million units, with gasoline vehicles representing 97 percent of those decreases. Price changes in this scenario are by far the largest, with the average price of all vehicles increasing by over $5,000.

Manufacturers lose a combined $31.5 billion in profits; US-based firms are better off on average, but only by comparison—they lose $7.74 billion per year. This is largely due to the fact that domestically produced vehicles decrease regardless of fuel type.

Finally, this type of tariff yields the largest yearly revenue: $64.3 billion. Notably, this is about 35 percent less revenues than the $100 billion the Trump Administration claimed these tariffs would collect. By coincidence, consumer welfare losses do reach about that number! In this scenario, the difference between revenues and welfare is the largest, as these tariffs create even greater distortions, leading consumers to purchase vehicles they would not have purchased in the absence of the tariffs, or to avoid purchasing new vehicles altogether.

Though the intended rationale for imposing vehicle tariffs is to increase domestic manufacturing, we demonstrate that these tariffs are distortionary in the short run, particularly given manufacturers’ limited ability to immediately invest in new manufacturing plants or identify new material and parts suppliers. These tariffs cause significant price increases on all vehicles, regardless of vehicle type and country of origin, and result in major reductions in new vehicle sales.

We do find that tariff revenues are substantial, yet the harm to consumers is almost twice as large as these revenues as consumers shift their purchases in response to higher prices to less desirable vehicles (including moving into the used vehicle market).

Our analysis has demonstrated that there are wide-reaching and complex interactions between vehicles depending on where they are produced and their fuel type. What is clear is that in the most stringent tariff, all manufacturers are worse off, and reductions in vehicle demand and increases in vehicle prices are very large.

If tariffs are imposed as a way to boost domestic manufacturing, then manufacturers will need time to adjust (in terms of finding new parts suppliers or building manufacturing plants) in order to achieve that goal. In the short run, because there is limited ability for domestic manufacturers to shift to new suppliers, consumer welfare and price impacts will be large. Ensuring stability of import tariffs would be more likely to boost domestic manufacturing and sourcing over the long run, thereby mitigating some of these costs, but so far the tariffs have been highly volatile. Note, however, that given the net losses in welfare from all scenarios, eliminating the tariffs would improve outcomes for manufacturers and consumers alike.

In sum, we find that these vehicle tariffs harm consumers and most manufacturers, and in aggregate, create larger costs than the revenues collected by the government.