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Sources: Accuracy, US Treasury<\/span><\/em><\/p>\n US federal spending continues to rise, and its deficit is reaching monumental levels. Despite the frenetic activity of the Department for Government Efficiency, spending reached $603 billion in February 2025, some $40 billion or 7% higher than the same month last year. Though certain departments were able to make cuts (e.g. $6 billion for education, $300 million for USAID), they were far outweighed by rises elsewhere: plus $5 billion year-on-year in health, plus $8 billion in Medicare, plus $10 billion in debt servicing, and the list goes on. Struggling to tame the government\u2019s outgoings, is this perhaps one of the reasons why Trump is raising tariffs, essentially to increase income?<\/p>\n Growth: a strong impact in America, more limited in Europe<\/span><\/strong><\/p>\n Sources: Accuracy, OECD<\/span><\/em><\/p>\n Let\u2019s examine these customs duties now. The OECD has assessed a scenario where the US raises tariffs by 10% for all countries, which in turn take countermeasures of the same magnitude. Ultimately, according to the OECD, this would result in a 2% decline in global trade in the two years following the year of tariff implementation. The impact on global growth in each of these two years would be -0.3 points, while overall inflation would rise by 0.4 points each year too. It is worth noting that the worst impacts would be felt in North America, with households bearing the brunt of the tariff effects: over three years, real household income in the US would fall by 1.25%, equating to a $1,600 decline in disposable income. Investment would also suffer, dropping by -2% in the US (for comparison, the eurozone\u2019s investment would fall by -0.6%). Of course, there would be an initial boost to public finances thanks to the significant cash inflows generated by the customs duties, estimated at 1.2% of GDP for the US. However, such a boon would be more than offset by the deteriorated macroeconomic environment. For the White House to maintain a stable deficit, it would need to further cut spending or raise taxes.<\/p>\n![\"\"](\"https:\/\/www.accuracy.com\/wp-content\/uploads\/2025\/04\/April-2025-Picture2-1024x481.png\")
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