US tariff income peaks in May, reducing budget deficit
In May, US tariff revenue reached an unprecedented level, contributing to a reduction in the budget deficit. In May, US customs duties reached an unprecedented level, contributing to a reduction in the monthly budget deficit. However, uncertainties linger regarding the sustainability of these inflows as the Trump administration engages in negotiations with trading partners and confronts a legal challenge concerning its tariffs.
The Treasury Department reported $23 billion in customs-duties revenue for May, as indicated in the agency’s monthly budget statement. This signifies a $17 billion, or 270 percent, rise compared to the same month in the previous year. May’s figure exceeds three times the monthly average projected for 2024. The fiscal deficit for May stood at $316 billion, reflecting a 17 percent decrease compared to the same month in the previous year, once adjustments for calendar-year variations are made. During the initial eight months of the fiscal year, the deficit amounted to $1.37 trillion. Considering the revenue deferred from 2023 to 2024 and the calendar discrepancies, the year-to-date gap has narrowed by 1 per cent, as stated by an agency official to reporters.
The increase in customs duties revenue is indicative of the implementation of several new tariffs instituted by President Donald Trump, the majority of which became effective in early April. In mid-May, the most significant tariffs imposed on China were temporarily lowered following a preliminary agreement between the US and China. This week, discussions between the US and China resulted in a proposed framework for an agreement, pending approval from Chinese President Xi Jinping.
Additionally, contributing to last month’s financial outcomes was a reduction in the Treasury’s cost of servicing its debt. An agency official attributed this to diminished payments on inflation-linked securities and a lowered discount on Treasury bills. Nonetheless, Treasury Secretary Scott Bessent earlier Wednesday cautioned that the United States is confronted with yet another substantial deficit for the current year. During his address to a House panel, he informed lawmakers that the gap is projected to be between 6.5 percent and 6.7 percent of gross domestic product, marking the third consecutive year exceeding 6 percent. Bessent aims to reduce it to approximately 3 percent. Rising expenditures on Social Security and healthcare programs persist in elevating US outlays, as indicated by Wednesday’s data.
