US July budget deficit rises 20% despite record Trump tariff revenue
The U.S. budget deficit in July jumped 20% from a year earlier, even as the government collected record revenues from President Donald Trump’s tariffs, according to Treasury Department data released Tuesday.
Customs revenue surged 273% year-over-year — an increase of $21 billion — as the administration’s import taxes generated the highest monthly income on record.
A Treasury official, speaking on condition of anonymity, said the higher deficit was driven partly by increased federal spending, including rising interest payments on public debt, cost-of-living adjustments to Social Security, and other expenses. The federal government’s gross national debt is now approaching $37 trillion.
While Trump has touted tariffs as a path to making America “rich,” federal spending continues to outpace revenue. Officials say the fiscal picture could improve as companies deplete pre-tariff inventories and are forced to import more goods, generating additional tariff income — though not enough to significantly reduce the deficit as promised.
Economists warn that if tariffs fail to meet expectations, Americans could face slower job growth, higher inflation, and increased interest rates on mortgages, auto loans, and credit cards.
The Committee for a Responsible Federal Budget estimates tariff income could generate about $1.3 trillion over Trump’s four-year term. But University of Pennsylvania economist Kent Smetters cautions that tariffs will likely lead to only “modest reductions” in federal debt.
In June, the Congressional Budget Office projected Trump’s tariff plan would cut deficits by $2.8 trillion over a decade but also slow economic growth, raise inflation, and erode household purchasing power. Revenue forecasts remain uncertain as tariff rates have changed repeatedly and some emergency measures face court challenges.
Treasury Secretary Scott Bessent said last month the administration is “laser-focused” on reducing the deficit and aims to secure more trade deals with key economies, including China.
On Monday, Trump extended a trade truce with Beijing for another 90 days, maintaining 30% tariffs as part of ongoing negotiations. China’s Commerce Ministry confirmed the extension.