US July budget deficit up 20% year-over-year despite record Trump tariff
income
[August 13, 2025]
By FATIMA HUSSEIN
WASHINGTON (AP) — The U.S. budget deficit in July climbed 20% this
fiscal year compared to the last despite the U.S. taking in record
income from President Donald Trump’s tariffs, according to Treasury
Department data released Tuesday.
The U.S. saw a 273% increase — or $21 billion — in customs revenue in
July over the same period last year, the data showed.
A Treasury official who spoke on the condition of anonymity to preview
the data said overall increased spending is in part due to a mix of
expenditures, including growing interest payments on the public debt and
cost-of-living increases to Social Security payouts, among other costs.
This comes as the federal government’s gross national debt creeps up to
the $37 trillion mark.
Even as Trump talks about America becoming rich because of his import
tax hikes, federal spending keeps outpacing the revenues collected by
the government. That financial picture might change as companies exhaust
their pre-tariff inventories, forcing them to import more goods and
generate even more in tax revenues that could whittle away at the
deficit without meaningfully reducing it as promised.
If tariffs fail to deliver on Trump's pledge to improve the government's
balance sheet, the American public could be faced with fewer job
options, more inflationary pressures and higher interest rates on
mortgages, auto loans and credit cards. The budget deficit is the annual
gap between what the U.S. government raises in taxes and what it spends,
over time feeding into the overall national debt.
While organizations like the Committee for a Responsible Federal Budget
say that tariff income can be a stream of meaningful revenue — estimated
to generate about $1.3 trillion over the course of President Trump’s
four-year term in office; some economists like Kent Smetters of the
University of Pennsylvania’s Penn Wharton Budget Model say tariffs are
likely to result “ in only modest reductions in federal debt.”
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President Donald Trump departs after speaking with reporters in the
James Brady Press Briefing Room at the White House, Monday, Aug. 11,
2025, in Washington. (AP Photo/Alex Brandon)
In June, the Congressional Budget Office estimated that President
Donald Trump’s sweeping tariff plan would cut deficits by $2.8
trillion over a 10-year period while shrinking the economy, raising
the inflation rate and reducing the purchasing power of households
overall. But revenue estimates are also difficult to predict as the
president has changed his tariff rates repeatedly and the taxes
declared as part of an economic emergency are currently under appeal
in a U.S. court.
A Treasury official did not respond to an Associated Press request
for comment on when the U.S. could begin to see tariff revenue start
to put a dent in the deficit.
Treasury Secretary Scott Bessent said last month on Fox Business
Network's “Mornings with Maria” that the administration is
“laser-focused on bringing this deficit down.” The Trump
administration expects to make more trade deals with other nations,
including China and other major economies.
For instance, on Monday, Trump extended a trade truce with China for
another 90 days, which preserves the 30% tariffs he had imposed as a
condition for negotiations. The previous deadline was set to expire
at 12:01 a.m. Tuesday.
Trump posted on his Truth Social platform that he signed the
executive order for the extension, and that “all other elements of
the Agreement will remain the same.” Beijing, at the same time, also
announced the extension of the tariff pause, according to the
Ministry of Commerce.
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Associated Press writer Josh Boak contributed to this report.
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