Authors: Bart L. Fischer and Joe Outlaw
Over the last few weeks, much of the attention around reciprocal tariffs has centered on the Supreme Court’s ruling about President Trump’s use of the International Emergency Economic Powers Act (IEEPA) to levy tariffs. While many questions have been raised about the impact of the court’s ruling on tariff revenue already collected—with a federal judge on the U.S. Court of International Trade ruling on this issue just yesterday—this article focuses on where tariff revenue goes once it’s collected. Interestingly enough, the answer to that question is rooted in the Agricultural Adjustment Act (AAA) of 1935.
How much tariff revenue has been collected?
From 2017 to 2019, during the first Trump Administration, customs duties more than doubled (from $34.6 billion to $70.8 billion, respectively). From 2024 to 2026, the Congressional Budget Office (CBO) estimates that customs duties will increase by 443% (from $77 billion to $418 billion, respectively), a reflection of President Trump’s renewed use of tariffs in his second term.
Figure 1. Customs Duties by Fiscal Year.
Where does the tariff money go?
So, if billions of dollars are collected in tariff revenue, where does it go? Section 32 of the AAA of 1935 requires that 30% of tariff revenue be used to:
- encourage the export of agricultural products;
- encourage the domestic consumption of farm products by diverting surpluses and increasing usage; and
- reestablish farmers’ purchasing power by making payments in connection with the normal production of any agricultural commodity for domestic consumption.
In 2017, Section 32 amounted to roughly $10.4 billion (or 30% of the $34.6 billion in tariff revenue collected in 2017). If $413 billion in tariff revenue is collected in 2026, the Section 32 amount would balloon to $125 billion, all of which is required to be set aside for the purposes/priorities listed above.
How are these priorities being met?
While 30% of customs duties flow to USDA, USDA then transfers a small amount off the top (30% of customs receipts from fishery products) to the Department of Commerce. USDA is then required to retain a portion of the funds (roughly $1.8 billion in fiscal year 2026) as reserved spending authority to support farmers and domestic food assistance programs primarily through commodity purchases. This amount is limited and indexed to inflation. The vast majority is then transferred to the Food and Nutrition Service (FNS) for the child nutrition programs. For example, in fiscal year 2024, 94% of the Section 32 funds (or $28.785 billion) flowed through to the child nutrition programs. Otherwise, USDA has virtually no discretion in the use of Section 32 funds.
With the tariff revenue projections for fiscal year 2026, the Section 32 funds available will dwarf total spending on the child nutrition programs at USDA. So, where does that leave farmers?
How are the tariffs being used to help farmers?
As noted above, clause 3 authorizes the use of Section 32 funds to reestablish farmers’ purchasing power by making payments in connection with the normal production of any agricultural commodity for domestic consumption. One would think Section 32 funds would be an obvious choice for helping farmers given (1) other countries have retaliated against U.S. products with their own tariffs in response to reciprocal tariffs and (2) farmer purchasing power has been decimated by inflation over the last 5 years. INSTEAD, since fiscal year 2018—including in the fiscal year 2026 agricultural appropriations bill that was signed into law in November 2025—the appropriators have mandated that no more than $350 million in carryover from Section 32 can be used for clause 3 activities. In other words, if CBO’s projections for fiscal year 2026 hold, Congress will essentially be dictating that no more than 0.28% of the $125 billion in tariff revenue flowing to USDA can be used to help farmers.
While the Trump Administration has drawn on authority and funding from the Commodity Credit Corporation (CCC) to provide trade and economic relief via the new Farmer Bridge Assistance (FBA) program, it begs the question of why Congress continues to insist that virtually none of the tariff revenue that flows to USDA via Section 32 be used to help farmers.
Sources:
The Budget and Economic Outlook: 2026 to 2036, Congressional Budget Office, February 11, 2026 (https://www.cbo.gov/publication/61882)
Farm and Food Support Under USDA’s Section 32 Account, Congressional Research Service, August 5, 2025 (https://www.congress.gov/crs_external_products/IF/PDF/IF12193/IF12193.5.pdf)
Fischer, Bart L., and Joe Outlaw. “Where is All the Tariff Money Going and Is it Being Used to Help Farmers?” Southern Ag Today 6(10.4). March 5, 2026. Permalink
