Donald Trump’s new tariffs may generate enough revenue to balance out the costs of his massive tax cuts, according to one of the world’s leading credit rating agencies.
S&P Global said the economic impact of the president’s “one big beautiful bill” — signed into law in July and including $3.7 trillion (£2.7 trillion) in tax cuts over the next decade — could be cushioned by his aggressive tariff strategy.
The agency’s upbeat outlook helped it maintain the US’s AA+ long-term rating, in sharp contrast to Moody’s, which downgraded America’s credit score from AAA in May over concerns about rising debt.
S&P suggested that tariff revenues could provide important relief for public finances.
Lisa Schineller, an analyst at S&P, said:
“Amid the rise in effective tariff rates, we expect meaningful tariff revenue to generally offset weaker fiscal outcomes that might otherwise be associated with the recent fiscal legislation, which contains both cuts and increases in tax and spending.
At this time, it appears that meaningful tariff revenue has the potential to offset the deficit-raising aspects of the recent budget legislation.”
The report bolsters support for President Trump’s tax plan, which billionaire Elon Musk once denounced as a “disgusting abomination.”
The tax bill faced heavy resistance before passing through Congress, with critics warning it would fuel America’s mounting debt.
Tensions around tariffs also sparked a public spat with Goldman Sachs. After the bank warned that US companies would pass tariff costs onto consumers, Trump blasted CEO David Solomon, saying he should “not bother running a major financial institution” and mocking his side career as DJ D-Sol.
Despite the criticism, tariffs have boosted revenue. In July, the US reported a $21 billion increase in customs duty collections. But that same month, the federal deficit grew nearly 20 percent, reaching $291 billion.
Debt concerns have pushed up borrowing costs. The 30-year Treasury bond yield hit 5.09 percent in May, though it has since eased to 4.94 percent.
Since returning to the White House in January, Trump has imposed sweeping tariffs on global partners. A 10 percent baseline duty was placed on all imports, with additional levies targeting specific countries and products.
Trade talks continue, with Trump announcing earlier this month that he would extend a suspension of tariffs on China until at least November, following a brief period where the two nations hit each other with tariffs above 100 percent.
Looking ahead, S&P projects the US budget deficit will average 6 percent of GDP between 2025 and 2028, down from 7.5 percent in 2024.
