In July, Trump’s tariffs brought in $29.6 billion, which is more than the $28 billion collected in June. These revenues have grown from $17.4 billion in April to $23.9 billion in May. If this monthly rate continues, we could see annual revenue reach $360 billion, although this is still below the $700 billion estimate from Commerce Secretary Lutnick. According to Goldman Sachs, 64% of the tariff costs are covered by U.S. companies, 22% by U.S. consumers, and 14% by others, likely including foreign firms. This balance helps keep inflation steady. If inflation keeps going down, the Federal Reserve might lower interest rates. Federal Reserve Board member Bowman expects three rate cuts by the year’s end.

Peak Tariff Revenue

To handle the 64% cost, businesses may need to improve efficiency or cut back on staff. While consumers face higher prices for imported goods, they could see lower service costs. A Federal Reserve analysis shows that imports make up about 11% of U.S. consumer spending, a figure that has stayed the same for over a decade. After August 1, the average tariff rate dropped, suggesting that U.S. tariff revenue may have peaked. Hitting the $700 billion target seems tough. July showed tariff revenue peaking at $29.6 billion, but recent signs hint this could be the peak. The average tariff rate fell as August began, indicating that the rapid growth in revenue may be slowing down. With inflation pressures easing, we should watch the Federal Reserve closely. Fed Governor Bowman’s mention of three potential rate cuts by year’s end is a strong indicator for interest rate traders. The fed funds futures now show over a 70% likelihood of a cut at the September 2025 meeting. The fact that U.S. companies pay 64% of the tariff costs directly affects their profits. It may be wise to purchase put options on sectors heavily dependent on imports, such as retail and industrial manufacturing, to protect against possible earnings shortfalls. Looking back at 2018-2019, similar pressures squeezed profit margins for months.

Market Volatility and Consumer Impact

The combination of slowing tariff revenue and potential actions from the Fed leads to significant uncertainty, boosting market volatility. The CBOE Volatility Index (VIX) has been stable lately, staying below 15 for much of last month. This could be a good opportunity to buy VIX call options at a low price, expecting more market swings ahead. While U.S. consumers are thought to absorb 22% of the costs, we should keep an eye on the services sector for possible relief. The latest inflation data from July 2025 showed that while prices for imported goods are rising, inflation for services has moderated slightly. If this trend continues, it could support consumer spending and help avoid a serious economic downturn, making us less aggressive on broad market shorts. Create your live VT Markets account and start trading now.

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