How the U.S. economy has defied doomsday predictions on tariffs

Inflation is lower than expected after President Trump's steep levies

- Konrad Putzier

Revenues from Trump's levies have been far lower than the Treasury Department predicted.

(BLOOMBERG)

When President Trump announced sweeping tariffs in April, economists predicted surging inflation and raised the odds of a recession. Companies and consumers stockpiled to get ahead of price rises. Those worries now seem overblown.

Inflation, while too high, is lower than forecasts. And the economy continues to grow despite the steepest tariffs in almost a century.

"I'm not sure they've mattered as much as people thought they would," said Kelly Kowalski , head of investment strategies at MassMutual.

At the same time, the promised benefits of tariffs also largely haven't come to pass: Revenues from Trump's levies have been far lower than the Treasury Department predicted, and there are few signs of a domestic manufacturing boom.

Annual inflation was 3% in September, above the Federal Reserve's 2% target. Tariffs have played a role, but a muted one, pushing up prices for goods such as furniture and apparel.

Onereason: The real tariffs companies pay are lower than the headline numbers suggest. This is underscored by weaker-than-expected customs and excise taxes collected by the U.S. Treasury.

The U.S. Treasury is on track to collect $34 billion in October, according to a Pantheon Macroeconomics analysis of customs data. If that pace continues, the U.S. would be on track for $400 billion over a full year, short of Treasury Secretary Scott Bessent's August prediction that tariffs could bring in between $500 billion and $1 trillion a year.