Even with customs revenue quadrupling under new tariffs, record-high spending on benefits, healthcare and debt interest drove the largest monthly deficit in US history.
ADVERTISEMENT
The US federal deficit surged to $291 billion (€248bn) in July, marking a 19% increase from the same month last year and one of the biggest jumps in recent years, according to Treasury Department data.
It’s the largest spending total ever recorded for the month of July, though some other months—particularly during the peak of COVID-19 stimulus—saw even higher outlays overall.
Even though the country is now earning more from tariffs—customs receipts were multiplied by four, going from about $7.1 billion (€6.06bn) in July 2024 to roughly $27.7 billion (€23.7bn) this year—this was not enough to offset a sharp rise in spending.
Why is the US federal deficit increasing?
Spending rose as bigger Social Security checks, increased Medicare and Medicaid costs, and higher interest payments on the national debt combined with pricier defence, education and healthcare programs, pushing the July deficit to a record high.
The July figure follows a volatile stretch in the federal government’s monthly balances, driven in part by new import duties and the quirks of the fiscal calendar.
In May, the deficit narrowed to $316 billion (€269.8bn), or $219 billion (€187bn) when adjusted for timing differences, as tariff revenue from newly imposed import taxes provided an early windfall. June appeared at first to show a rare surplus, but this was largely an illusion—when adjusted for payment shifts, the month actually posted a $71 billion (€60.6bn) deficit.
July’s return to a deep shortfall underscores a broader fiscal reality. Namely, while tariffs have injected tens of billions into the Treasury in recent months, they have not changed the structural imbalance between revenue and expenditure. Spending has continued to outpace receipts, even amid healthy customs income.
June’s brief surplus aside, the government’s shortfall remains substantial, with one-off revenue boosts from tariffs unable to contain the impact of persistent, broad-based spending growth. As the Treasury’s figures show, even months of record customs collections have done little to slow the pace of red ink.
