Trump administration's tariff revenue weakens, low inflation boosts US stock market sentiment

BlockBeats News, January 6th, the latest data shows that U.S. inflationary pressure is significantly lower than market expectations. The latest CPI released by the U.S. Bureau of Labor Statistics is 2.7%, well below Wall Street’s previous consensus forecast of 3.1%, surprising the market.

Since Trump announced the implementation of “D-Day” tariffs in April last year, the market has generally expected tariffs to push up inflation. However, two recent studies from the San Francisco Federal Reserve indicate that historical experience shows tariffs have not triggered a large-scale inflation outbreak, as importers have shifted supply chains, evaded tariffs, and negotiated exemptions with various countries, significantly diluting the actual tariff rates. The studies suggest that tariffs have a more noticeable negative impact on economic growth and employment, but their inflationary push is far below expectations.

Pantheon Macroeconomics reports that U.S. tariff revenue has begun to decline:

· October peak: $34.2 billion
· November: $32.9 billion
· December: $30.2 billion

Analysts point out that the current average effective tariff rate in the U.S. is about 12%. Institutional estimates suggest that tariffs have about a 0.9 percentage point impact on PCE inflation, of which 0.4 percentage points have already been absorbed by the market, indicating that the main inflation shocks may have passed, and core PCE is expected to approach the 2% target within the year.

Tariff revenue falling short of expectations has also weakened the U.S. government’s fiscal space. Treasury Secretary Bessant previously estimated that tariffs could generate between $500 billion and nearly $1 trillion in revenue, but independent estimates show that tariff revenue in 2025 may only be between $261 billion and $288 billion. Currently, the U.S. cumulative deficit for the 2026 fiscal year has reached $439 billion, with total national debt exceeding $38.5 trillion. As tariff revenue declines, the sustainability of funds for Trump’s “Trump Account” and the universal cash subsidy plan faces challenges.