Year-to-date deficit rises 14% to US$1.365tn despite record receipts
The US budget deficit narrowed in May compared to a year earlier, but the federal government remains on track for a significantly larger shortfall this fiscal year, as surging debt interest and elevated spending continue to outweigh rising revenues.
The Treasury Department reported a May deficit of US$316bn, down 9% from the same month in 2024, helped in part by a sharp increase in customs duties driven by President Donald Trump’s sweeping new tariff regime. After adjusting for calendar effects—mainly June benefits paid early—the monthly deficit was US$219bn, a 17% drop from the adjusted May 2024 figure.
Year-to-date, however, the deficit has grown 14%, reaching US$1.365tn for the first eight months of fiscal 2025, compared to US$1.202tn a year ago. The deficit is now running above 6% of GDP—an unusually high level outside of wartime or economic crisis.
Tariffs help, but spending still dominates
Gross customs receipts surged to a record US$23bn in May, nearly four times higher than the US$6bn collected a year earlier, as Trump’s tariffs on most US trading partners took fuller effect. For the fiscal year to date, customs duties have totalled US$86bn—up 59% from the same period in 2024.
Overall receipts reached US$371bn for the month, up 15% year-on-year, buoyed by both tariff collections and stronger tax intake. But outlays still exceeded revenues, rising 2% month-on-month to US$687bn and bringing total spending for the fiscal year to US$4.846tn—an 8% increase from last year and another record high.
The largest expenses continued to be entitlement programs such as Medicare and Social Security, though debt servicing costs remained a major burden.
Debt interest a growing concern
Interest payments on the US$36.2tn national debt totalled US$92bn in May. While that was down 10% from a year earlier, cumulative interest expenses for the fiscal year stand at US$776bn—second only to Medicare and Social Security in terms of federal outlays. The full-year interest burden is projected to exceed US$1.2tn.
Though yields on 10-year Treasuries remain relatively stable at around 4.4%, they have risen in recent months following Trump’s “liberation day” announcement of new tariffs. The yield trajectory—and with it, the cost of financing—remains highly sensitive to future Fed rate decisions and inflation expectations.
Mounting warnings over fiscal sustainability
Senior figures on Wall Street have begun to sound the alarm. JPMorgan CEO Jamie Dimon, BlackRock’s Larry Fink, and Bridgewater’s Ray Dalio have all warned in recent weeks that the scale of America’s debt and persistent deficits could eventually spark financial instability.
Despite strong revenue collection, the fiscal path remains unsustainable without structural changes.
