US deficit grows to over $373 billion in July despite tariff revenue surge

WASHINGTON - The US government’s budget deficit grew nearly 20 per cent in July to US$291 billion (S$373.4 billion) despite a nearly US$21 billion jump in customs duty collections from US President Donald Trump’s tariffs, with outlays growing faster than receipts, the Treasury Department said on Aug 12.

The deficit for July was up 19 per cent, or US$47 billion, from July 2024. Receipts for the month grew 2 per cent, or US$8 billion, to US$338 billion, while outlays jumped 10 per cent, or US$56 billion, to US$630 billion, a record high for the month.

The month of July 2025 had fewer business days than 2024, so the Treasury Department said that adjusting for the difference would have increased receipts by about US$20 billion, resulting in a deficit of about US$271 billion.

Net customs receipts in July grew to about US$27.7 billion from about US$7.1 billion in the year-earlier period due to higher tariff rates imposed by Mr Trump, a Treasury official said. These collections were largely in line with the increase in June customs receipts after steady growth since April.

Mr Trump has touted the billions of dollars flowing into US 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 Aug 12 showed increases in prices for some tariff-sensitive goods like furniture, footwear and auto parts, but they were offset by lower petrol prices in the overall index.

For the first 10 months of the fiscal year, customs duties totalled US$135.7 billion, up US$73 billion, or 116 per cent, from the year-earlier period.

US Treasury Secretary Scott Bessent told Fox Business Network’s Kudlow programme that the growing US tariff revenue will make it difficult for the Supreme Court to rule against Mr Trump’s import taxes if a legal challenge to them makes its way to the country’s top court.

Mr Ken Matheny, director of macroeconomics at 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 per cent, lower than the current average tariff rate of about 18 per cent 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.

“I suspect these numbers are showing us there is a sizeable balance of imports where the duties haven’t been recognised yet,” Mr Matheny said, adding that this could lead to a “temporary big surge in duties”.

The overall year-to-date budget results showed a US$1.629 trillion deficit, up 7 per cent or US$112 billion, from the same period a year earlier.

Receipts were up 6 per cent, or US$262 billion, to US$4.3 trillion, a record high for the 10-month period, while outlays grew 7 per cent, or US$374 billion, to US$6 trillion, also a 10-month record.

The year-to-date customs duties were more than eaten up by an increase of 10 per cent or US$141 billion in costs for government healthcare programmes, including Medicare for seniors and Medicaid for the poor, to US$1.6 trillion.

The Social Security pension programme, the largest single expense item, saw an increase of 9 per cent or US$108 billion over the first 10 months of fiscal year 2025 to US$1.4 trillion.

Interest on the public debt also continued to grow, topping US$1.01 trillion for the 10-month period, an increase of 6 per cent or US$57 billion over the prior year due to slightly higher interest rates and increased debt levels. REUTERS