In July, Trump tariff revenues reached $29.6 billion, surpassing the $28 billion collected in June. These revenues have increased from $17.4 billion in April to $23.9 billion in May. If the current rate of $29.6 billion per month continues, the annual figure could reach $360 billion, though this is still below the $700 billion projected by Commerce Secretary Lutnick.
Goldman Sachs estimated that 64% of tariffs are paid by US companies, 22% by US consumers, and 14% by others, possibly foreign companies. This distribution helps keep inflation in check, and if inflation decreases further, the Federal Reserve may have the opportunity to cut interest rates. Federal Reserve Board member Bowman anticipates three rate cuts by the end of the year.
Peak Tariff Revenue
For businesses to manage the 64% expense, they might need to enhance efficiency or reduce payroll. While consumers face higher prices for imported goods, they may experience relief from potentially lower service costs. According to a Federal Reserve analysis, imports represent about 11% of US consumer spending, a figure that has remained unchanged for over ten years. The average tariff rate decreased after August 1, indicating a potential peak in US tariff revenue. Achieving the $700 billion target appears challenging.
We saw tariff revenue hit a high of $29.6 billion in July, but there are signs this might be the peak. The average tariff rate actually moved down to start August. This suggests the aggressive climb in collections could be leveling off.
With inflation pressures potentially easing, we should pay close attention to the Federal Reserve. Fed Governor Bowman’s mention of three possible cuts by year-end is a significant signal for interest rate derivative traders. We’re already seeing this priced in, as fed funds futures now imply a greater than 70% chance of a cut at the September 2025 meeting.
The idea that U.S. companies are absorbing 64% of the tariff cost puts a direct target on corporate profits. We should consider buying put options on sectors most reliant on imports, like retail and industrial manufacturing, to hedge against potential earnings misses. Looking back at the 2018-2019 period, we saw how these exact pressures squeezed margins for months.
Market Volatility and Consumer Impact
This mix of slowing tariff revenue and potential Fed action creates significant uncertainty, which is fuel for market volatility. The CBOE Volatility Index (VIX) has been fairly calm recently, trading below 15 for most of last month. We could see this as a chance to buy VIX call options at a relatively low price, anticipating choppier markets ahead.
While U.S. consumers are said to bear 22% of the cost, we need to watch the services sector for relief. The latest inflation data from July 2025 showed that while imported goods prices are up, services inflation has started to moderate slightly. If this trend continues, it could support overall consumer spending and prevent a sharp economic downturn, making us less aggressive on broad market shorts.
