U.S. customs duties surged to a record high in May, contributing to a reduction in the budget deficit for the month. However, there are lingering uncertainties regarding the sustainability of these inflows as the Trump administration engages in negotiations with trading partners and confronts a judicial challenge regarding its tariffs.
The Treasury Department reported $23 billion in customs-duties revenue for May, according to the agency’s monthly budget statement. This marks a $17 billion, or 270 percent, rise compared to the same month a year prior. The figure for May exceeds three times the monthly average projected for 2024.
Impact of new tariffs
The fiscal deficit for May stood at $316 billion, reflecting a 17 percent decrease from the same month the previous year, after adjustments for calendar-year discrepancies. For the first eight months of the fiscal year, the deficit totaled $1.37 trillion. When accounting for revenue deferred from 2023 to 2024 and calendar differences, the year-to-date gap is 1 percent smaller, as reported by an agency official.
The increase in customs duties revenue can be attributed to several new tariffs implemented by President Donald Trump, the majority of which came into effect in early April. The highest tariffs on China were temporarily lowered in mid-May when the U.S. and China reached a preliminary agreement. This week’s discussions between the U.S. and China resulted in a framework for a potential agreement, although Chinese President Xi Jinping still needs to endorse it.
Additionally, last month’s financial outcomes benefited from a reduction in the Treasury’s cost of servicing its debt, attributed to lower payments on inflation-linked securities and a decreased discount on Treasury bills, as noted by an agency official.
Nevertheless, Treasury Secretary Scott Bessent cautioned that the U.S. is poised to face another substantial deficit this year. During a session with a House panel, he informed lawmakers that the gap would range from 6.5 percent to 6.7 percent of gross domestic product — marking a third consecutive year above 6 percent. Bessent aims to reduce this figure to approximately 3 percent. Ongoing increases in expenditures on Social Security and healthcare programs also continue to elevate U.S. outlays, according to the data.
