Record Revenue from Trump Tariffs, Yet Budget Deficit Expands by 20%: "Tariffs Bring in Money, But Deficit Doesn't Stop"

1. What Happened—“Record Revenue” and “20% Expanding Deficit”

On August 12 (local time), two conflicting facts were reported based on U.S. Treasury data. Despite a 273% increase in tariff revenue in July compared to the same month last year (approximately $21 billion) due to tariffs imposed by the Trump administration, the cumulative fiscal deficit for the year is still 20% larger than the previous year. The expansion of the deficit is attributed to rapidly increasing interest payments and spending on social security benefits. The total U.S. debt is approaching $37 trillion, revealing the reality that tariff revenue alone cannot absorb the structural increase in spending.

2. The “Balance” of Trump Tariffs in Numbers

Tariffs are "taxes on imports," initially paid by U.S. importing companies. The jump in July's tax revenue is also attributed to the effect of "clearing out pre-stock" and higher tax rates starting to apply to a broader range of items. On the other hand, tariffs are easily passed on to prices, impacting household and small business costs. The Congressional Budget Office (CBO) estimates that the overall tariff increases announced in 2025 will lead to a cumulative reduction in the deficit by $2.8 trillion over the next decade, while also expecting a slowdown in growth and a decrease in households' real purchasing power.cbo.gov

Private estimates also acknowledge the "revenue effect" of tariffs while emphasizing side effects. The Penn Wharton Budget Model (PWBM) at the University of Pennsylvania estimates a long-term decrease in GDP by about 6%, wages by 5%, and a lifetime loss of about $22,000 for median households.Penn Wharton Budget Model

Meanwhile, the Committee for a Responsible Federal Budget (CRFB) summarizes that "tariffs generate significant new revenue," with an estimated $1.3 trillion over the entire term of the Trump administration (though the effective amount may fluctuate due to economic ripple effects).Global Newscrfb.org

3. Extension of the “Truce”—Postponing Additional Shocks

On August 12, the U.S. and China agreed to extend the 90-day “tariff truce.” The imposition of the most severe additional tariffs has been postponed, and negotiations continue with a 30% tariff for the time being. This has the effect of "buying time" for financial markets and corporate supply chains, but the fundamental friction remains unresolved.Reuters

4. Why the Deficit Isn’t Shrinking—“Tailwinds of Revenue” vs. “Headwinds of Expenditure”

The current U.S. fiscal situation is such that even if tariffs become a "new pillar of tax revenue," the increase in interest payments and aging-related expenditures surpasses it. In fact, as of July, the U.S. deficit continues to expand, inching closer to a total debt of $37 trillion. Even if tariff revenue increases, structural expenditure factors push back, meaning that the fiscal balance will not dramatically improve in the short term.

5. Tariffs as “Tax Policy”—How Do They Affect Households and Businesses?

・Price Pass-through: Tariffs are easily added to consumer prices. The CBO points out that real household income is suppressed.cbo.gov
・Investment and Employment: PWBM indicates a downward pressure on long-term GDP and wages. Companies face rising costs for raw materials and parts, which can lead to more cautious investment decisions.Penn Wharton Budget Model
・Historical Levels: According to Yale University's Budget Lab, the effective tax rate after the 2025 tariff increase will be 14.7%, the highest since the late 1930s. The sustainability of the policy and the consequences of international retaliation are focal points.The Budget Lab at Yale

6. Administration Communication and “Tariffs as Policy Management”

The Trump administration explains that "tariffs will make America rich," but Treasury Secretary Scott Bessent himself acknowledges the reality of "who bears the burden." Nevertheless, the administration shows a policy of "reducing the deficit by making more trade agreements" and continues negotiations with countries using tariffs as leverage. The extension of the “truce” with China is an example of this practical management.Global News

7. Reactions on Social Media—“Who Pays?” and “How Effective Is It?”

On social media, the following points are prominent (summarized from typical posts).

• “In the end, it's U.S. importing companies and consumers who pay”—On economic-related Reddit, the view that tariffs effectively act as a "domestic consumption tax" impacting households is gaining support.Reddit

• “Let's proceed with organized discussions”—In a megathread on r/AskEconomics, a calm explanation was shared in a FAQ format regarding the burden, policy consistency, and who benefits.Reddit

• “It makes sense as revenue, but it's not a sustainable solution”—The CRFB emphasizes "significant new revenue" in blogs and on X, while also cautioning about the side effects on long-term fiscal structure and growth.crfb.orgX (formerly Twitter)

• “Reactions from countries are also divided”—International reports from public radio conveyed the reality of mixed concessions, retaliations, and wait-and-see approaches depending on the target country.kuow.org

8. Practical Tips for Japan, Companies, and Investors

1. Price Design: Incorporate the dual impact of exchange rates and tariffs into price revisions, and secure alternative procurement sources for key materials.

2. Inventory Management: Prepare for changes in the tariff schedule by smoothing out inventory "peaks and valleys" to diversify the risk of delivery timing.

3. Contract Clauses: Specify Tariff Adjustment Clauses and supplier pass-through rules.

4. Market Monitoring: Continuously check for headline risks of additional tariffs or exemptions as the U.S.-China “truce” milestone (90 days) approaches.Reuters

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