Trump's bid to make tariffs pay for the US government

Treasury Secretary Scott Bessent had repeatedly warned that the US debt burden is on an "unsustainable" path. Meanwhile, President Donald Trump vowed that tariffs would make the US "very rich" in addition to his goals of punishing perceived unfair traders and reshoring American industry.

Eight months into the second Trump administration, it's clear that tariffs and spending cuts already appear to be on track to improve the US fiscal balance, regardless of their other merits or long-term effects.

We've visualized the year-on-year growth rates for US federal revenue and spending over the past 14 months. After hitting a 2-year peak near 22% in the last month of the Biden administration, spending growth is now almost flat year-on-year.

Meanwhile, federal receipts are seeing accelerated growth. This is largely a personal income-tax phenomenon, but customs duties are accounting for an increasing share.

Tariff revenue growth (in dark green) was often tiny or non-existent in the Biden years. After Trump's tax cuts, It's also worth noting the difference in corporate tax receipt growth under both administrations.

Year-to-date customs duties collected reached USD 144.37 trillion as of August, as the second chart shows. That's roughly double the full-year 2024 level.

But as our third chart shows, in absolute terms this figure is dwarfed by the volume of personal and corporate income taxes.

It's worth remembering that Trump imposed these tariffs under the International Emergency Economic Powers Act (IEEPA), which faces legal challenges; if the Supreme Court rules against Trump in November, it's unclear whether this would lead to a budget-busting refund of tariffs paid (or at least, some form of credit).

We conclude with a measure of spending growth in different government departments. The narrowing fiscal deficit has been driven by cuts to education, training, employment and social services, community and regional development and international affairs. Meanwhile, the politically sensitive social-security bill keeps rising.

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