US inflation below expectations, tariff revenue plunges, fiscal space squeezed

【CoinPost】The latest data threw a surprise: the actual US CPI is only 2.7%, whereas Wall Street previously announced 3.1%, directly hitting the face.

Interestingly, after Trump announced that wave of tariff policies last year, everyone thought it would trigger runaway inflation. But what happened? Research from the San Francisco Fed found that historically, tariffs haven’t caused inflation as exaggerated as imagined. The reason is quite realistic—importers are not fools; they either relocate supply chains or find ways to get exemptions, essentially diluting the tax rate. So, tariffs hit the economy’s growth and employment more directly, but their impact on prices isn’t as fierce.

From actual data, tariff revenue is still declining: a high of $34.2 billion in October, dropping to only $30.2 billion in December. Calculations show that the current average effective tariff rate in the US is about 12%, contributing only around 0.9 percentage points to the Consumer Price Index (PCE), with 0.4 percentage points already absorbed by the market. In other words, the inflation shock may have already passed, and core PCE is expected to approach the 2% target within this year.

But here’s the problem. The Treasury Secretary previously claimed that tariff revenues could reach $500 billion to nearly $1 trillion, but independent estimates show that the actual revenue in 2025 will only be between $260 billion and $280 billion. The US fiscal year 2026 deficit has already piled up to $439 billion, and the total national debt exceeds $38.5 trillion. The decline in tariff revenue means that the funds for those spending projects planned by Trump are in question—where will the money come from?