Weekly Economic Trends and Indicators

The Headlines:

Tariff revenue continues to grow, according to the Treasury Daily Statement, with $182.8 billion collected so far this fiscal year. Monthly tariff collections have increased every month since March of this year when the new tariffs started to take effect.

As of Friday (August 29), the “de minimis” exemption for packages valued under $800 has been completely removed for all countries. The de minimis exemption allowed small value packages to enter the U.S. free of tariffs. The exemption gave rise to direct-to-consumer shipping to avoid tariffs. In May, the Trump administration removed this exemption for packages from China and Hong Kong.

The Details:

Tariff revenue growth is in line with, if not slightly ahead of, early estimates which were that tariff revenue for fiscal 2025 would be approximately double its 2024 level. With one month left in the federal government’s fiscal year, we can expect at least another $30 billion in tariff revenue, which would put the total at over $200 billion compared to $95.7 billion in fiscal 2024.

The removal of the de minimis exemption decreases the efficiency and increases the cost of shipping small-value packages. However, the benefits to both the foreign producers and the domestic consumers are still large enough to continue the practice, though possibly at a lower volume. U.S. based manufacturers and retailers who compete with foreign suppliers who operated under the de minimis exemption stand to benefit as it may help to level the playing field. Consumers will likely pay more, but it remains to be seen how much of an effect the end of de minimis will have on prices of goods shipped in this manner.

The Context:

The growth of tariff revenue has prompted considerable discussion in recent days with a new publication from the Congressional Budget Office (CBO) that projects that tariff revenue could reduce the primary deficit (not including interest payments on the debt) by $3.3 trillion over the next decade and another $700 billion in reduced interest payments for a total impact of $4 trillion. However, the CBO also notes that that Public Law 119-21 (“One Big Beautiful Bill”) is expected to increase deficits by $3.4 trillion over the same period. Therefore, it is unlikely that the government will be able to use the additional revenue to provide large tax cuts or rebates, but rather that the government will need to rely on the new revenue to fund previous commitments.

As the de minimis example illustrates, the true burden of this additional revenue will be shared between foreign suppliers, domestic firms importing intermediate or final goods, and consumers. At first, foreign suppliers and domestic firms may bear more of the cost to try to retain market share. As time goes on, price hikes will be passed along to the consumer, potentially causing changes in buying habits—and therefore changes in tariff revenue—that are difficult to predict.

Why does this matter for the Quad Cities? The growth of tariff revenue shows that the tariffs are starting to have an impact. However, we have not yet seen much movement in consumer prices as foreign suppliers and domestic importers have been absorbing the increased cost. However, if the tariffs are allowed to continue for an extended period of time, we can expect some amount of increased domestic production which could support certain types of manufacturing. The downside is that it will come at a higher cost for the buyers of those goods regardless of where they are produced.

Next week: National and regional employment update

Grow Quad Cities is a full-service regional economic development organization (formerly a part of the Quad Cities Chamber).