U.S. Budget Deficit Jumps 20% to $291bn in July Even as Trump’s Tariffs Swell Customs Revenues

The U.S. government’s budget deficit widened by nearly 20% in July to $291 billion, even as customs duty collections surged by almost $21 billion due to President Donald Trump’s tariffs, according to Treasury Department data released Tuesday.

The July shortfall was $47 billion higher than the same month last year, driven by outlays growing far faster than receipts. Federal revenues rose 2%, or $8 billion, to $338 billion, but spending jumped 10%, or $56 billion, to $630 billion — the highest ever for the month. The Treasury noted that July had fewer business days than last year; adjusting for that difference, receipts would have been about $20 billion higher, trimming the monthly deficit to roughly $271 billion.

Customs receipts in July soared to $27.7 billion from $7.1 billion a year earlier, reflecting the higher tariff rates imposed under Trump’s trade policy. The jump, largely consistent with June’s tariff collections, marks steady growth since April. For the first 10 months of the fiscal year, customs duties totaled $135.7 billion, up $73 billion — or 116% — compared to the same period last year.

Trump has repeatedly touted the tariffs as a windfall for U.S. coffers, though the duties are paid by importers, many of whom pass some of the cost on to consumers. This dynamic has fueled concerns that the levies could feed inflation, putting Trump at odds with Federal Reserve Chair Jerome Powell over the potential economic fallout.

Inflation data from July, however, showed a more nuanced picture. The Consumer Price Index revealed that while some tariff-sensitive categories saw price increases, the overall rise in prices was softer than anticipated. Household furnishings and supplies rose 0.7% after a 1% jump in June, apparel prices edged up just 0.1%, and core commodity prices increased by 0.2%. Prices for canned fruits and vegetables — often imported and sensitive to tariffs — were flat. Lower gasoline prices helped offset these increases in the broader index.

“The tariffs are in the numbers, but they’re certainly not jumping out hair on fire at this point,” said Jared Bernstein, a former White House economist who served under President Joe Biden, speaking on CNBC.

For the fiscal year to date, the U.S. deficit has reached $1.629 trillion, 7% higher than the same period last year. Revenues climbed 6% to a record $4.347 trillion for the 10-month period, while outlays grew 7% to $5.975 trillion, also a record.

Economists are divided over the long-term inflationary impact of the tariffs. While many see them as causing a one-time price adjustment, the broad range of goods covered under Trump’s orders has raised fears that price pressures could persist.

“Inflation is on the rise, but it didn’t increase as much as some people feared,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. “In the short term, markets will likely embrace these numbers because they should allow the Fed to focus on labor-market weakness and keep a September rate cut on the table. Longer term, we likely haven’t seen the end of rising prices as tariffs continue to work their way through the economy.”

As the September Fed meeting approaches, policymakers face a delicate balancing act of weighing persistent fiscal deficits, rising but tempered inflation, and the potential economic aftershocks of a trade policy that has both bolstered federal revenue and rekindled concerns over the cost of everyday goods.

With the tariff regime still in its early stages, economists warn the impact could intensify in the coming months, particularly if more categories begin to absorb higher import costs. However, July’s CPI suggests the inflationary effect is selective for now, but the full picture may yet unfold later this year.