U.S. customs duties surged to $29.5 billion in August

Economic

Summary:

SummaryU.S. customs duties surged to $29.5 billion in August a new monthly record and the first full month of President Trump’s “reciprocal” tariff regime. While this has strengthened federal revenues in the short term, economists warn that its inflationary effects are visible in consumer prices...

Tariff Revenue Expansion

According to the U.S. Treasury Department’s monthly statement, August’s $29.5 billion in customs duties marked a significant increase from July’s $27.7 billion and June’s $26.6 billion. This sharp climb reflects the impact of Trump’s Aug. 7 tariff expansion, which applied duties ranging from 10% to 50% on a wide swath of imported goods. On a fiscal-year basis, tariff collections have now reached $165.2 billion with three weeks left in FY2025, underscoring how central they have become to the administration’s revenue narrative.

The August CPI report showed price pressures that many economists attribute to tariff pass-through. Food and apparel prices were among the clearest examples of tariff-driven cost increases, highlighting the connection between customs duties and higher consumer prices. While the CPI headline reading was largely in line with expectations, it confirmed that tariffs are adding “stickiness” to inflation just as the Federal Reserve prepares to cut interest rates.

Legal Uncertainty

Despite the near-term boost to government coffers, the durability of this revenue source is in question. Two lower courts have ruled that the blanket “reciprocal” tariffs imposed under the International Emergency Economic Powers Act exceed the president’s legal authority. A Supreme Court ruling is expected by year-end, and Treasury Secretary Scott Bessent has acknowledged that a negative decision could force the government to refund roughly half of recent collections potentially wiping out much of the fiscal benefit.

Even at record highs, tariff receipts represent under 10% of total federal revenues, while monthly government spending in August reached $689 billion, producing a $345 billion deficit. This underlines that tariffs, though politically powerful, are not a structural solution to U.S. fiscal imbalances. The market impact is more immediate: by lifting inflation, tariffs may limit the Fed’s ability to cut rates as aggressively as investors expect, potentially introducing volatility in equities and bonds.

Source: CNBC

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Gerik

Economic

Economic Performance Flatlines

Data from the Office for National Statistics show the UK economy neither grew nor contracted in July, marking a slowdown from June’s 0.4% expansion. The stagnation was driven primarily by a 0.9% contraction in production output, while services and construction sectors experienced marginal growth.

The second quarter of 2025 had delivered a 0.3% rise in GDP, slower than the first quarter’s 0.7% expansion but stronger than many forecasts. Economists now anticipate that this growth momentum will weaken in the latter half of 2025, influenced by adjustments in trade, stockpiling patterns, public sector spending, and net acquisitions of precious metals.

Implications for Fiscal Policy

Chancellor Rachel Reeves, who has emphasized funding government spending through tax receipts rather than borrowing, faces a heightened challenge. The stagnation in July underscores ongoing difficulties in generating economic momentum, particularly in light of prior tax hikes and the prospect of further increases in the upcoming Autumn Budget.

Paul Dales of Capital Economics highlights that any potential tax adjustments will be closely scrutinized, as they could further influence economic activity. The government’s aim to reduce national debt depends on maintaining a balance between fiscal responsibility and economic support.

Monetary Policy Considerations

The Bank of England, confronted with persistent inflation 3.8% in July, above expectations must weigh fiscal uncertainty against the need for monetary support. The central bank held rates steady in its upcoming September 18 meeting after a narrow 5–4 decision to cut the Bank Rate to 4% in August, adopting a “gradual and careful” approach to easing.

Analysts, including Carsten Brzeski of ING, continue to anticipate a potential rate cut in November, though recent hawkish tendencies have tempered confidence in immediate action. Inflation resilience and large fiscal deficits complicate the central bank’s ability to provide aggressive support.

The combination of economic stagnation, fiscal pressures, and inflation concerns presents a delicate environment for policymakers. With the Autumn Budget and the Bank of England’s upcoming meetings, the UK faces a balancing act: supporting growth while maintaining fiscal discipline and controlling inflation, amid signs of a broader slowdown in economic activity.

Source: CNBC

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Samantha Luan

Stocks

Forex

Political

Economic

Markets

Weekly jobless claims outweighed the ECB policy meeting, US CPI and a 30-y Treasury auction yesterday! The ECB as expected left its policy rate unchanged at 2%. New staff projections were little changed from June, basically confirming inflation has returned close to target and is expected to stay there over the policy horizon. (2.1% from 2% for this year; 1.7% from 1.6% in 2026 and 1.9% from 2% in 2027). Projections for core inflation were little changed and confirm 2% price stability as well. Growth was upwardly revised for this year 1.2% (due to a strong start of the year). It will ease next year to 1% .However, the context isn’t that bad with uncertainty on tariffs easing and fiscal support supporting activity further out. Interestingly, during the press conference, the ECB chair guided that risks to growth have become more balanced and, even stronger, that the ‘disinflation process is over’. Even in a data-dependent approach, this doesn’t suggest any further easing anymore. The German yield curve bear flattened with yields rising 3.4 bps at the short end (2-y). The 30-y declined marginally. Market pricing of a final ECB rate cut next year dropped to less than 50%. In the US, intraday market volatility was mainly driven by a sharp jump in US jobless claims (263k from 236k). US August CPI data didn’t bring the hoped for soft surprise as was the case for PPI on Wednesday. Headline inflation rose 0.4% M/M and 2.9% Y.Y (from 2.7%). Core prices added 0.3% M/M and 3.1% Y/Y. The follow-though of tariffs to consumers remains under control (at least of now). US yields initially spiked lower on the jobless claims (2-y below 3.5%; 10-y below 4%), but the move again couldn’t be sustained. At the end of the day, the US yield curve even slightly bull flattened with the 2-y only marginally lower (-0.2 bps) and the 30-y easing 4.25 bps supported by a solid 30-y auction. The euro outperformed but with an EUR/USD close at 1.1734, the tight sideways consolidation pattern easily holds. US equities still gain on mildly bad news/easing of financial conditions, with the three major indices closing at record levels. (Dow +1.36%).

Today’s eco calendar is thin in Europe. Even so, markets will keep a close look at Moody’s reassessing its credit rating of France (AA- with negative outlook). Will the agency reduce the rating to the A-category? In the US, the Michigan consumer confidence survey contains the closely watched inflation expectations gauges, but we don’t expect these to profoundly change the markets’ assessment for next week’s Fed meeting. Last but not least, US Congressional Budget Office updates its economic forecast to include the macro-economic effects of tariffs (period 2025-2028). Of late, markets tended to embrace a scenario that tariffs might at least partially mitigate the negative impact on budget/the debt trajectory of the Big Beautiful bill. If this is confirmed by CBO, it might, at least temporary, mitigate fiscal risk premia (at the long end of the US yield curve). Even so, we stay cautious to see the US 10-y yield settling below the 4% barrier for a long period.

News & Views

The International Energy Agency is projecting an ever bigger record oil surplus for 2026. In updated forecasts, the agency rose estimates for global oil demand this year and the next slightly to 740k bpd, citing weaker oil prices and a “somewhat improved” economic outlook. Output, however, will exceed consumption by an average of 3.33 mln bpd in 2026 with the number even higher in H1 2026 (4 mln barrels per day). The 2026 average is 360k more than expected last month’s report and a record, barring the 2020 pandemic episode. IEA’s assessment followed the OPEC+ decision this weekend to restore a new layer of halted supplies by more than a year early. Oil prices fell yesterday and continue to do so this morning. Brent returns to the lower bound of the summer trading range around $65/b..

Gold prices over the last couple of days hit another record near the $3650 area. While the precious metal has already set more than 30 nominal records so far this year, the latest surge meant it has also topped the inflation-adjusted peak set in 1980. Demand for gold has been strong with the usual suspects having sustained a blistering rally: from geopolitical uncertainty over lingering inflation woes to huge debt buildup and the prospect of Fed rate cuts. Central banks are among the major buyers while ETF inflows have shot up too..”

Source: ACTIONFOREX

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Daniel Carter

Russia-Ukraine Conflict

Ukrainian drones attacked Primorsk, home to Russia's main oil-loading terminal on the Baltic coast, in one of the largest attacks on its enemy since the start of the war.

The drones set fire to a vessel moored in Primorsk, but the blaze has already been put out, the region's governor Aleksandr Drozdenko said in a Telegram statement. "There is no risk of the vessel sinking or an oil-product spill," he said without providing further details.

Ukraine has ramped up attacks on its neighbor's energy facilities in the past few weeks. Kyiv has said it aims to curtail Russia's ability to supply fuel to its front lines, while also hurting its export revenues.

Russia intercepted and downed 221 Ukrainian drones, including nine over the Moscow region, the Defense Ministry said in a Telegram statement.

The Primorsk port, which also loads coal, fertilizers, wheat and general cargoes, is a key Baltic outlet for Russian crude oil and petroleum products. Last month, it loaded some 330,000 barrels a day of diesel-type fuel and about 1.15 million barrels of crude, according to data compiled by Bloomberg.

In the past few weeks, Ukrainian drones have hit oil refineries in southern Russia and the Volga region, as well as a pumping station on the westbound Druzhba crude pipeline. So far drone attacks on Russia's oil-export terminals, especially on the Baltic coast, have been rare. In August, Novatek PJSC's Ust-Luga gas processing facility was damaged in a strike.

Russian military forces have made regular air assaults on Kyiv and other Ukrainian cities. Earlier this week, Poland sought a consultation of NATO powers after shooting down drones that crossed into its territory during Russia's latest massive air strike on Ukraine, calling the incursion an "act of aggression."

Source: Bloomberg Europe

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Gerik

Economic

Data Provider Halts Releases

Shanghai Tiantian Fund Sales Corp., a key provider of financial data for China’s asset management industry, did not publish its daily figures on Thursday, including investor redemptions from fixed-income funds. Clients who follow the platform closely reported the omission, citing the private nature of the matter. The company did not immediately comment when contacted.

These flow data are widely monitored by traders to gauge sentiment in China’s bond market, the world’s second-largest. Their sudden absence is unusual and recalls prior instances when data feed suspensions caused market jitters.

Bond Market Under Pressure

The suspension coincides with a deepening selloff in Chinese government bonds, pushing 30-year yields to levels not seen since November. Contributing factors include the ongoing bull run in China’s stock market, the reinstatement of a value-added tax on certain bond investments, and proposed changes to mutual fund fees.

The bond market has been highly volatile over the past year. Earlier in 2025, yields fell to record lows amid expectations of aggressive monetary easing to combat deflation. However, with equity prices climbing, investors are shifting away from debt, pressuring yields upward.

Regulatory Context

Historically, Chinese regulators have intervened to manage market swings that could disrupt economic stability. Tools have included verbal warnings, liquidity injections, and other measures aimed at moderating volatility in both stock and bond markets. The suspension of flow data signals potential concern about excessive price swings and market instability.

The halt of bond flow information reduces transparency for market participants, complicating risk assessment and portfolio management decisions. Investors will likely watch closely for guidance from the People’s Bank of China and other authorities on future market interventions.

This episode highlights the fragile balance between China’s stock and bond markets, and the challenges regulators face in maintaining orderly financial conditions amid rapid market movements.

Source: Bloomberg

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Gerik

Economic

Record Tariff Receipts

The U.S. Treasury confirmed that August customs duties brought in approximately $29.5 billion, following July’s $27.7 billion and marking the first full month under Trump’s new reciprocal tariffs, which took effect on August 7. These tariffs, ranging from 10% to 50% on various imported goods, were designed to pressure trading partners while also raising domestic revenue.

Treasury Secretary Scott Bessent and President Trump have highlighted the additional funds as part of broader efforts to repair the U.S. fiscal position, with Bessent noting that the administration is “fixing the financial shambles it inherited.” Nevertheless, tariffs remain a relatively minor source of income, accounting for less than 10% of total government receipts of $344 billion for August.

Inflationary Pressures

The rise in tariff revenue coincided with August’s inflation report, which suggested that higher import duties contributed to price increases. Economists, including RSM’s Joe Brusuelas, pointed to sectors like food and apparel as areas where tariff effects are most evident, raising concerns that the policy, while boosting revenue, may exacerbate cost-of-living pressures.

Some of Trump’s new reciprocal tariffs face legal challenges under the International Emergency Economic Powers Act of 1977. Courts have already deemed portions potentially unlawful, with a final ruling expected from the Supreme Court before year-end. A negative outcome could force the administration to return about half of the collected revenue. Tariffs imposed under other legal authorities, however, remain unchallenged.

Broader Fiscal Context

Despite the surge in tariff receipts, government spending for August reached $689 billion, producing a monthly deficit of $345 billion. Fiscal year-to-date collections total approximately $165.2 billion, highlighting that while tariffs provide a modest fiscal boost, they do not substantially offset broader budgetary gaps.

Trump continues to promote tariffs as a dual tool for revenue generation and economic leverage, citing benefits for the stock market and overall wealth. However, economists and policymakers caution that rising consumer prices and ongoing legal uncertainties may limit the long-term effectiveness of these duties as a sustainable revenue source.

Source: Yahoo Finance

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Glendon

Economic

Forex

The U.K. economy registered zero growth in July, according to the latest data from the U.K.'s Office for National Statistics on Friday.

Economists polled by Reuters had expected the country's gross domestic product (GDP) to be flat, following a 0.4% expansion in June.

It comes after the economy grew by a better-than-expected 0.3% in the second quarter, although this was down from bumper growth of 0.7% seen in the first quarter.

Economists now expect a slowdown to take hold of the U.K. in the latter half of 2025.

"After a surprisingly stronger second quarter, where the U.K. claimed the fastest growth rate among G7 economies, all signs point to a slowdown in economic activity in the second half of the year," Sanjay Raja, Deutsche Bank's chief U.K. economist, noted this week.

"A course correction in trade-fronting, stockpiling, net acquisitions of precious metals, and public sector spending, we think, will see U.K. GDP growth slow into the second half of 2025," he added in emailed comments.

Headache for the Bank of England

An economic slowdown will add to the Bank of England's current dilemma, as it weighs sticky inflation (which rose to a hotter-than-expected 3.8% in July), with the Autumn Budget of Nov. 26, in which Chancellor Rachel Reeves will reveal her fiscal plans for 2026.

"Inflation resilience obviously makes it harder for central banks to cut further," Fabio Balboni, senior European economist at HSBC, told CNBC last week.

"Then, on the other hand, you have fiscal concerns, still very large fiscal deficits, starting in the U.K., for instance, with very difficult decision looming ahead for the government at the Autumn Budget," Balboni added.

The Bank of England is due to meet in the meantime on Sept. 18, but is expected to hold rates steady after cutting them in August.

Then, the bank's nine-member monetary policy committee voted by a majority of 5–4 to reduce the key interest rate, the "Bank Rate," by 25 basis points to 4%, saying it was taking a "gradual and careful" approach to monetary easing.

The central bank's Nov. 6 meeting is now in the spotlight, particularly as it comes just ahead of the budget.

"We still expect a rate cut in November, though the hawkish August decision weakened our conviction," Carsten Brzeski, global head of Macro at ING, said Thursday.