4 days ago
US deficit grows to $291 billion in July despite tariff revenue surge
(Reuters) -The U.S. government's budget deficit grew nearly 20% in July to $291 billion despite a nearly $21 billion jump in customs duty collections from President Donald Trump's tariffs, with outlays growing faster than receipts, the Treasury Department said on Tuesday.
The deficit for July was up 19%, or $47 billion, from July 2024. Receipts for the month grew 2%, or $8 billion, to $338 billion, while outlays jumped 10%, or $56 billion, to $630 billion, a record high for the month.
The month of July this year had fewer business days than last year, so the Treasury Department said that adjusting for the difference would have increased receipts by about $20 billion, resulting in a deficit of about $271 billion.
Net customs receipts in July grew to about $27.7 billion from about $7.1 billion in the year-earlier period due to higher tariff rates imposed by Trump, a Treasury official said. These collections were largely in line with the increase in June customs receipts after steady growth since April.
Trump has touted the billions of dollars flowing into U.S. coffers from his tariffs, but the duties are paid by companies importing the goods, with some costs often passed on to consumers in the form of higher prices.
Consumer price index data on Tuesday showed increases in prices for some tariff-sensitive goods like furniture, footwear and auto parts, but they were offset by lower gasoline prices in the overall index.
For the first 10 months of the fiscal year, customs duties totaled $135.7 billion, up $73 billion, or 116%, from the year-earlier period.
U.S. Treasury Secretary Scott Bessent told Fox Business Network's "Kudlow" program that the growing U.S. tariff revenue will make it difficult for the Supreme Court to rule against Trump's import taxes if a legal challenge to them makes its way to the country's top court.
Ken Matheny, director of macroeconomics Yale University's Budget Lab, said it is unclear how much further monthly tariff revenue will grow, but the applied tariff rate measured by customs duties divided by the value of goods imports is still around 10%, lower than the current average tariff rate of about 18% based on the latest announcements.
Significant numbers of firms are likely holding goods in bonded customs warehouses in the hope that negotiations will bring tariff rates down, but at some point those goods will enter the country, triggering duty payments, he said.
