Bond investors are increasingly banking on Donald Trump’s sweeping import tariffs to provide a crucial revenue stream for the US government, a dramatic reversal from earlier this year when his trade war rattled markets and triggered a sharp sell-off in Treasuries, according to reporting by the Financial Times.
The US president’s levies on trading partners sent shockwaves through global markets in April and raised fears of an economic slowdown, prompting Trump to suspend some tariffs at the time. But traders now see the remaining duties, which generate hundreds of billions of dollars annually, as key to offsetting Trump’s tax cuts and curbing the government’s borrowing needs.
“The only way I can see for the US government to reduce its outstanding debt in the near term is to use the tariff revenue,” Andy Brenner, head of international fixed income at NatAlliance Securities, told the Financial Times, pointing also to revenues from chipmakers’ China sales. “If all of the sudden the tariff revenue will not be there, that is a problem.”
The Congressional Budget Office (CBO) projected last month that Trump’s tariffs would deliver $4tn in revenue over the coming decade, helping to fund his flagship “One Big Beautiful Bill Act,” which is itself expected to raise US borrowing by $4.1tn.
Still, doubts over the durability of those revenues resurfaced last week, when an appeals court upheld a lower court ruling that Trump had overstepped his authority in imposing some levies. While the tariffs remain in place pending a Supreme Court appeal, analysts said the ruling sparked a fresh sell-off in government bonds as investors weighed the risk of reduced tariff income.
Thierry Wizman, global rates strategist at Macquarie Group, told the Financial Times: “If the bulk of Trump’s tariff programme is nullified by the courts some analysts will cheer, inflation will subside, growth may improve, and the Fed may be more inclined to ease monetary policy. But if the focus is on debt and deficits at that time, the bond market may riot.”
Credit rating agencies have also factored tariff revenues into their assessments. Both S&P and Fitch recently signaled that the duties were part of the reason they stopped short of further downgrading US sovereign credit.
Yet some investors warn that tariffs alone cannot solve America’s fiscal challenges. “If the tariffs were put on pause, it deprives Uncle Sam of a revenue source,” Des Lawrence, senior investment strategist at State Street Investment Management, said. “But the bigger negative picture is the sheer scale of government spending. It’s helpful in plugging a gap, but there’s still a big issue in America spending much more than it’s receiving.”
Even with tariff income, the CBO forecasts US debt-to-GDP will surpass its World War II peak by 2029 — a warning sign that, despite temporary relief, structural fiscal risks remain.
