Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Treasury Secretary Scott Bessent stated on Tuesday that the Trump administration’s immediate priority for revenue generated from import tariffs is to reduce the national debt, rather than issuing rebate checks to American citizens. Speaking on CNBC’s “Squawk Box,” Bessent indicated that while direct financial relief to the public might be considered in the future, the current focus, shared with President Donald Trump, is on fiscal responsibility. This comes as some lawmakers have proposed using tariff revenue for direct payments to households.
Tariff Revenue and Debt Reduction
Bessent emphasized that revenue from import tariffs will be directed towards reducing the US national debt. He acknowledged that S&P Global recently affirmed its AA+ credit rating on the United States, but reiterated the administration’s “laser-focused” approach on debt reduction. Donald Trump has previously suggested using tariff funds for both debt reduction and potentially a “dividend” for the American people.
Since April, when a significant portion of Trump’s global tariffs were implemented, the United States has collected $100 billion in tariff revenue, according to Treasury Department data through July. Bessent noted that tariff revenue is currently on pace to exceed earlier expectations, stating he would “raise that up substantially” from his previous estimate of $300 billion for the year.
Rebate Proposals and Future Considerations
Some lawmakers have put forth proposals to utilize tariff revenue to distribute rebate checks, potentially amounting to at least $600 per adult and dependent child. Under such a plan, a family of four could receive approximately $2,400 from the federal government. Bessent suggested that after achieving progress in reducing the deficit-to-GDP ratio and paying down debt, tariff revenue “can be used as an offset to the American people.”
While declining to specify how much higher revenues are expected to climb, Bessent expressed hope for future relief for Americans through lower interest rates. He highlighted that lower rates could particularly benefit households struggling with high credit card debt and potentially stimulate the housing market.
Interest Rates and Economic Indicators
The Federal Reserve has maintained steady interest rates since December of last year. Market probabilities for a September rate cut initially increased following a July jobs report that indicated modest employment gains over the preceding three months. However, these odds subsequently decreased, falling from nearly 100% to approximately 80%, after the latest inflation data showed a pickup in some price increases for both businesses and consumers.
Bessent largely dismissed these recent inflation gains, attributing a significant portion of the Producer Price Index’s inflation pickup to stock market gains. He noted that higher interest rates are creating “distributional aspects,” particularly impacting housing and lower-income households burdened by credit card debt. Conversely, he observed a robust capital expenditures boom, partly driven by AI and tax reforms, contrasting with struggles in home building.
Housing Market Dynamics
Bessent suggested that a reduction in interest rates by the Federal Reserve could facilitate an increase in home building activity. He argued that constraining home construction could lead to inflationary pressures in the long run. Recent data from the US Census Bureau for July showed a significant uptick in new home construction, rising 5.2% from June to a seasonally adjusted annual rate of 1.428 million, exceeding economist expectations of a 0.3% increase.
This July increase follows three months of weak housing starts, indicating a potential shift in the sector. Despite the recent positive data, the administration’s focus remains on utilizing tariff revenue to address national debt, while monitoring broader economic conditions for potential future relief for citizens.
