Trump Administration Tariff Revenue Declines as Low Inflation Boosts Stock Market Sentiment

Jan. 6 data shows U.S. inflation pressure is far lower than market expectations. The latest CPI from the U.S. Bureau of Labor Statistics hit 2.7%—well below Wall Street’s prior consensus forecast of 3.1%—catching markets off guard. Since former President Trump announced "Liberation Day" tariffs in April last year, markets have widely expected tariffs to push up inflation. But two recent studies from the San Francisco Fed note that historical experience shows tariffs haven’t triggered a large-scale inflation surge. That’s because importers have shifted supply chains, avoided tariffs, negotiated exemptions with countries, and significantly diluted effective tax rates. The studies conclude tariffs’ negative impact on economic growth and jobs is more pronounced, while their inflationary effect is far smaller than expected. A Pantheon Macroeconomics report highlights U.S. tariff revenue has started to decline: • October peak: $34.2 billion • November: $32.9 billion • December: $30.2 billion Analysts note the current average U.S. effective tariff rate is around 12%. Institutions estimate tariffs have a 0.9 percentage point impact on Personal Consumption Expenditures (PCE) inflation, with 0.4 percentage points already absorbed by markets. The main inflation shock may have passed, and core PCE is expected to near the 2% target this year. Lower-than-expected tariff revenue has eroded the U.S. government’s fiscal space. Treasury Secretary Bessemer previously projected tariffs would generate $500 billion to nearly $1 trillion in revenue, but independent calculations show 2025 tariff revenue may only reach $261 billion to $288 billion. The U.S. has a cumulative $439 billion deficit for fiscal 2026, with total national debt exceeding $38.5 trillion. With falling tariff revenue, the sustainability of Trump’s proposed "Trump Account" and universal cash subsidy plan is in question.