Ajay Bagga Decodes Big Question For Markets: How Can US Customs Collect $100 Bn In Enhanced Tariffs Revenues?

In a recent development, the US customs duties collections has surged again in June as US President Donald Trump's tariffs talks were reiterated again, topping $100 billion for the first time during a fiscal year and helping to produce a surprise $27 billion budget surplus for the month, the Treasury Department reported.

According to US budget data, tariffs are starting to become a significant revenue contributor for the federal government, with customs duties in June hitting new records.

Previously Trump had said that "the big money" would start to flow in after he imposes higher "reciprocal" tariffs on U.S. trading partners on August 1.

What Does Market Expert Ajay Bagga Say?

The US markets were up on strong economic data, market expert Ajay Bagga said on Friday as the Asian markets are following the lead, with Australian markets hitting an all time high.

Bagga added that the Japanese inflation is coming down just before this months' election and this is seen in a positive light.

Additionally, "markets have been driven by concerns on US deficit and debt, Trump policy uncertainty, tariff's impact and the White House criticism of the US Fed and Chair Powell, with markets unnerved by talk of Trump firing Powell."

The Chair of the US Federal Reserve, Jerome Powell was recently on Trump's target as he has suggested that he is considering removing Powell.

"However, strong earnings and a stable US economy is providing a silver lining which markets are grasping to rally to all time highs," Bagga added.

"India is seeing continued FPI selling and another underwhelming earnings season for IT so far. As more bellwethers come out with their earnings, the guidance for the rest of the year and the next will provide the catalyst for Indian markets," he further added.

How Can The US Customs Collect $100 Bn In Enhanced Tariff Revenues?

According to Ajay Bagga, though the US CPI is rising, it is still below 3%.

According to him, in order to collect $100 billion in enhanced tariff revenues, US corporates would need to deliver steady margins and profits, and it would be imperative that the US labour market stops seeing mass layoffs on shrinking corporate margins.

Additionally, the US retail consumption would need to stay steady and upwards.

Further, Bagga added that no one is footing the $100 billion in 6 months, $ 64 billion in Q2 , and expected to be $ 300 billion in 12 months bill, starting from US consumers to corporates, especially in terms of reducing margins so far.    

What Is Happening Then?

According to Ajay Bagga, the following factors are occurring:

1. The fall in energy and services prices is helping keep US inflation low.
2. Foreign exporters have cut their pricing and absorbed a large part of the tariffs so far.
3. A lot of non-perishable goods were front loaded and preordered from December to March 2025, those inventories are now running down.
4. As foreign exporters absorb some of the tariffs via lower offered prices, their margins shrink, they pressurise their suppliers, who pressurise their suppliers...that deflation is evident across the world in the form of negative WPI/PPI....

Will This Sustain?

"As per estimates, the tariff impact has been absorbed by various parties...Foreign suppliers, their supply chains; US importers and their margins; US consumers (2.9% core CPI in June)," Bagga said.

Going ahead, Bagga added, investors should expect more pass through to US consumers as exporter margins reach loss making levels, as US importers are not able to absorb any more of the tariffs.

Additionally, inflation will rise past 3% in the next quarter.

"As de-inventorisation happens (running at around $600 billion per month now), more price decisions will need to be taken by Exporters/Importers/Retailers/ End Consumers," the market expert noted.

Further, Bagga added that this $300 billion tariff will ultimately be a drag on the $16 trillion US consumer market or on the $3.2 trillion US goods import market.

The impact is masked by absorption of these costs in supply chain margins for now, he added. As pass throughs accelerate, investors can expect demand to be impacted.

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