Tariff revenues are dramatically falling short of initial White House expectations, generating roughly $100 billion less than projected, according to a recent analysis from Pantheon Macroeconomics. Treasury Secretary Scott Bessent predicted in August that tariffs would raise “well over half a trillion, maybe toward a trillion-dollar number,” but data compiled through Nov. 25 implies that customs and excise taxes annualize to only $400 billion.
This shortfall stems from an average effective tariff rate (AETR) that is far lower than anticipated. The AETR is currently estimated at just 12%, falling significantly short of the nearly 20% widely expected earlier this spring. Even the Congressional Budget Office (CBO) was surprised, reducing its estimate of the pre-substitution tariff rate to 16.5% from 20.5% last month. Pantheon Macro chief U.S. economist Samuel Tombs and senior U.S. economist Oliver Allen identified three primary factors driving the lower-than-expected AETR, starting with the U.S.’s relationship with China. In short, the plunge in trading activity with China isn’t being made up for with fresh tariff revenue.
