Higher customs duties from tariff increases implemented under President Donald Trump contributed to deficit reduction in the 2025 fiscal year, Treasury officials said in an October 2025 report, with collections rising sharply compared with the previous year. Federal tariff revenue for fiscal 2025 increased by about $118 billion, helping to narrow the budget shortfall.
Customs duties, collected largely on imports subject to higher tariff rates introduced in 2025, accounted for a significant portion of the overall increase in government receipts. Total tariff collections for the year were well above levels seen in 2024, contributing to stronger revenue growth and a smaller deficit than previously projected, the Washington Times reported.
However, economists say that while tariff revenue can provide a near-term boost to federal receipts, its broader economic effects are more complex and mixed.
Some analysts point out that tariff revenue is a relatively small share of total federal receipts and that, over the long term, tariffs can dampen economic growth and distort trade. A study by the Peterson Institute for International Economics found that higher tariffs tend to increase costs for U.S. businesses and households and can reduce purchasing power, even though they generate revenue at the border.
Federal Reserve economists have highlighted that tariffs can affect supply chains and production costs, potentially slowing demand in some sectors. Tariffs can also translate into higher prices for consumers and may lead to weaker overall economic activity, which can, in turn, limit longer-term revenue gains.
Separately, the Congressional Budget Office (CBO) has projected that tariff increases in 2025 could contribute to deficit reduction over the next decade if maintained, although the effect depends on how trade partners, businesses and consumers adjust to the higher duties.
Supporters of the tariff strategy argue that duties collected on imports can help reduce federal borrowing and improve certain trade balances, while critics counter that consumers ultimately bear much of the cost of tariffs through higher prices. A recent German study found that a large share of tariff costs is passed through to U.S. consumers, highlighting the domestic impact of trade levies.
The debate over the economic role of tariffs continues as policymakers assess their use as both a revenue-raising tool and a means of addressing trade imbalances and industrial policy.
Trump’s tariffs have been the subject of much debate and controversy, and a legal battle over whether he has the authority to impose them has been launched. But Treasury Secretary Scott Bessent said it is “very unlikely” the Supreme Court will overturn Trump’s use of emergency powers to impose the tariffs, with a ruling due soon.
“I believe that it is very unlikely that the Supreme Court will overrule a president’s signature economic policy,” Bessent said during an appearance on Meet the Press. “They did not overrule Obamacare. I believe that the Supreme Court does not want to create chaos.”
Last month, the Supreme Court upheld a key provision of the Affordable Care Act that allows a federal panel to recommend preventive services insurers must cover at no cost to patients, CNBC reported.
Bessent’s remarks came one day after Trump announced plans to impose a new round of tariffs on European goods until what he described as “a Deal is reached for the Complete and Total purchase of Greenland.”
Trump did not specify which statute he is invoking, though the move mirrors prior “liberation day” tariffs imposed under the International Emergency Economic Powers Act, or IEEPA.
Trump said tariffs on goods from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland will begin at 10 percent on Feb. 1 and rise to 25 percent on June 1.
He argued that only the United States has the resources and strategic reach to secure the island and counter growing geopolitical threats in the Arctic.
“We have subsidized Denmark, and all of the Countries of the European Union, and others, for many years by not charging them Tariffs, or any other forms of remuneration,” Trump wrote. “Now, after centuries, it is time for Denmark to give back.”
