Trump tariffs ‘could cover costs of big, beautiful bill tax cuts’

Trump’s bill faced significant opposition before it eventually passed through Congress - Aaron Schwartz/CNP/Bloomberg

Donald Trump’s tariffs could generate enough revenues to cover the costs of his sweeping tax cuts, according to one of the world’s biggest credit rating agencies.

S&P Global said the economic impact of the US president’s “one big beautiful bill” act – which was signed into law in July and includes $3.7 trillion (£2.7 trillion) of tax cuts over the next 10 years – could be offset by his aggressive trade war.

The agency’s optimistic outlook for the Act led to it holding firm on its AA+ long-term rating for the US.

That is in contrast to fellow credit ratings agency Moody’s, which downgraded the US from the gold standard AAA sovereign debt rating in May amid concerns about ballooning debt.

S&P Global suggested tariffs could soften the blow to the US public finances.

Lisa Schineller, an analyst at S&P, said: “Amid the rise in effective tariff rates, we expect meaningful tariff revenue to generally offset weaker fiscal outcomes that might otherwise be associated with the recent fiscal legislation, which contains both cuts and increases in tax and spending.

“At this time, it appears that meaningful tariff revenue has the potential to offset the deficit-raising aspects of the recent budget legislation.”

This will serve to strengthen Mr Trump’s controversial tax-cutting bill, which was branded a “disgusting abomination” by billionaire Elon Musk earlier this year.

The bill faced significant opposition before it eventually passed through Congress, with many critics warning it would increase America’s vast debt pile.

It comes after Mr Trump was recently embroiled in a row with Goldman Sachs about the impact of his tariffs on the US economy.

The president criticised David Solomon, the Goldman boss, by claiming that he should “not bother running a major financial institution” after the bank said American companies would start passing on the costs from tariffs to consumers.

He urged Mr Solomon to “focus on being a DJ”, in reference to the Goldman boss’s previous hobby moonlighting as a disc jockey under the moniker DJ D-Sol.

The US reported a $21bn jump in customs duty collections from Mr Trump’s tariffs in July.

However, in the same month, the government budget deficit grew by nearly 20pc to $291bn.

Concerns about the US debt pile have sent the cost of government borrowing higher, with the US 30-year Treasury bond yield peaking at 5.09pc in May – although it has since fallen back to 4.94pc.

Since returning to the White House in January, Mr Trump has imposed sweeping tariffs on global trading partners. The president set a baseline 10pc tariff on all imports to the US, with various additional duties imposed on different countries and products.

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The US remains involved in trading negotiations with various nations. Mr Trump announced this month that he would extend a suspension of tariffs on China until at least early November after the world’s two largest economies briefly imposed levies of more than 100pc on each other.

S&P projected the American government deficit would average 6pc of GDP between 2025 and 2028, down from 7.5pc in 2024.

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