Scott Bessent Takes Premature Victory Lap on Tariff Revenues
Collections represented a surge in imports trying to beat higher rates—with a slump to follow.
Last Friday, U.S. Treasury Secretary Scott Bessent took a victory lap as his department reported an unexpected increase in receipts from tariffs. The revenue undoubtedly came from a surge in imports to the U.S., which led to payments that filled federal coffers. It would seem to be a win for an administration that has staked an awful lot on waging a trade war with the entire planet to (take your pick) redress wrongs done to America, raise revenue for the government, and encourage domestic manufacturing and employment. But that victory lap comes too soon; the tariff windfall more likely represents efforts by U.S. firms to accumulate inventory before tariff rates rise even higher.
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Big Revenues From a Surge in Imports
"Another promise made. Another promise kept," Bessent boasted on X. "As President Trump works hard to take back our nation's economic sovereignty, today's Monthly Treasury Statement is demonstrating record customs duties – and with no inflation!"
The Treasury Secretary referred to a report that the U.S. government had posted a surplus in June. In particular, customs duties were $27 billion for the month, up from $23 billion in May and 301 percent higher than June of the previous year.
The customs revenue increase reflects the increase in traffic seen at U.S. ports. That would seem to support the Trump administration's claims that raising tariffs doesn't necessarily harm the United States. But digging into the details reveals a story less convenient for the White House.
"After reporting slumping shipping volumes in May, the Port of Los Angeles rebounded in June with an 8% surge in year-over-year imports," according to Fortune's Sasha Rogelberg. "But Executive Director Gene Seroka is not yet celebrating, warning the spike is reflective of stockpiling activities from companies trying to dodge tariff deadlines."
In fact, Seroka expects business at the Port of Los Angeles to ease in August as the next trade deadline approaches. On July 8, the president announced a 50 percent tariff on copper to be imposed with that August 1 deadline, which drove prices for the metal to a record high. You can understand why American manufacturers dependent on copper would want to fill their warehouses ahead of time.
The Surge Was a Temporary Response to Looming Higher Rates
The same is true of other goods and commodities. A July 15 brief from the Penn Wharton Budget Model estimates that "importers avoided 22.8 percent ($12.6 billion) of new tariffs by accelerating purchases and changing their purchasing patterns in response to the new tariff regime."
Penn Wharton economists found, during the first quarter of the year, "aggregate import values exceeding historical trends by 26 percent." Imports slumped again in April and May, in line with observations by Seroka of the Port of Los Angeles. But they've apparently picked back up again to beat the August deadline. Among the countries from which imports increased dramatically were Canada, China, Ireland, Switzerland, Taiwan, and several countries in Southeast Asia (which Penn Wharton believes largely represents substitution for and transshipment of Chinese products). Imports increased for goods including automotive parts, pharmaceuticals, precious metals, and semiconductors.
Of course, an increase in imports means a rise in customs duties collected on goods entering the United States. The Penn Wharton economists "estimate that the new tariffs raised $42.6 billion in revenue between October 2024 and May 2025 relative to a counterfactual projection with no change in tariff rates." By acting before higher rates set in, "importers have avoided $12.6 billion in tariffs, equivalent to 22.8 percent of new revenue, by accelerating purchases and changing their purchasing patterns in response to the new tariff regime."
Which is to say that the Treasury Department's June revenue bonanza may be followed by a slump if fewer shipments cross the border when higher rates set in. Penn Wharton's Tariff Simulator projects "a reduction in imports by over 32% or $8.4 trillion due to higher prices on imported goods paid by US consumers and firms" over the next 10 years. Fewer imported goods will mean lower tariff collections: "If baseline import demand in the United States across all goods and services further stagnates over the next decade due to lower economic growth, total new tariff revenue will decrease to $2.8 trillion" from the current forecast of $3.2 trillion over that time.
We Paid Those Tariffs—and Higher Prices
That mention of "higher prices on imported goods paid by US consumers and firms" deserves to be emphasized because it highlights the fact that tariffs are taxes on Americans. Ultimately, most of the burden of high rates is shouldered by companies and individuals within the U.S. As the Tax Foundation's Alex Durante pointed out in February, "rather than hurting foreign exporters, the economic evidence shows American firms and consumers were hardest hit by the Trump tariffs."
The Yale Budget Lab agrees, estimating in May that "the price level from all 2025 tariffs rises by 1.7% in the short-run, the equivalent of an average per household consumer loss of $2,800" in 2024 dollars. In particular, the Yale economists found "consumers facing 15% higher shoe prices and 14% higher apparel prices in the short-run."
Even Walmart, which had vowed to absorb as much as possible of the tariff burden, conceded two months ago that prices would have to rise because of the trade war.
This week, the Federal Reserve Bank's "beige book" noted that "in all twelve Districts, businesses reported experiencing modest to pronounced input cost pressures related to tariffs" and that "many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges."
Penn Wharton's concerns, mentioned above, about "lower economic growth" are shared by the Tax Foundation and by the Yale Budget Project. The Tax Foundation's Erica York and Alex Durante forecast that the Trump administration's tariffs would "reduce US GDP by 0.8 percent" before taking foreign retaliation into account. Yale economists see a similar GDP reduction of 0.7 percent.
If the courts issue a final ruling against Trump's use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs, that will reduce the negative effects on the economy. But it will also take a chunk out of the revenues the administration expects to collect.
So, Secretary Bessent's victory lap on tariff revenues was a little premature. And so are hopes that the trade war won't damage commerce and the U.S. economy.
