America’s tariff windfall: Duties are becoming Washington’s surprise cash cow

By: Team India Tracker

The customs windfall is a mixed blessing: higher tariffs swell government revenue but inflate costs for firms reliant on imported parts and goods

For decades, customs duties made up only a modest share of US federal revenue, rarely touching the 3 per cent mark. But that quiet era is over. A surge in tariff collections this year has transformed customs into one of Washington’s biggest fiscal surprises—reflecting how shifts in trade policy are reshaping global commerce and America’s balance sheet. 

In FY2016, the US government collected $34.85 billion in customs duties. From then through early FY2025, customs typically contributed less than 3 per cent of total receipts. Since May 2025, though, its share has climbed sharply—surpassing 5 per cent for the first time in over a decade and peaking at 8.57 per cent in August. The last time tariffs played such a visible role in federal revenue, flip phones were still popular. 

The spike is more than a statistical quirk. It signals a fundamental shift in how the US economy is interacting with the world. 

Customs revenue at record levels 

In dollar terms, the jump is staggering. The Treasury collected $77 billion in customs duties in FY2023-24. One year later, that figure nearly tripled to $194.86 billion—a 153 per cent increase. Customs now accounts for 3.72 per cent of total federal revenue, up from 1.57 per cent the previous year. 

The only monthly decline came in September 2025, when customs’ share slipped slightly even as receipts edged higher—from $29.5 billion in August to $29.68 billion. The fall wasn’t due to weaker trade but a sharp rise in income-tax collections. 

After decades of relative stability, customs revenue is suddenly a live wire in Washington’s fiscal mix. 

Tariffs return to centre stage  

The explanation lies in tariffs—higher, broader, and faster-rising than at any time in recent memory. The average monthly tariff rate on U.S. imports climbed from 2.43 per cent in October 2023 to 9.76 per cent in June 2025, easing only slightly to 9.21 per cent in July. 

In April 2025 alone, the average tariff rate more than doubled year-on-year to 5.51 per cent. For comparison, it hovered around 2 per cent to 2.5 per cent through most of FY2024. 

This acceleration reflects a mix of factors: new duties on strategic sectors, tighter trade barriers on key materials, and the Biden administration’s “friend-shoring” push to shift supply chains away from China and toward trusted partners. What began as a geopolitical realignment has turned into a fiscal windfall. 

India’s rise, China’s retreat 

Nowhere is this shift clearer than in the changing geography of US imports. India’s share of US goods imports hit 3.3 per cent in the second quarter of 2025—the highest in a decade—according to data from the Bureau of Economic Analysis. 

China’s share, meanwhile, fell below 10 per cent for the first time since 2015, underscoring both US diversification efforts and China’s slowing export engine. 

For Washington, the realignment is strategic. For New Delhi, it’s lucrative. Indian exports of chemicals, pharmaceuticals, machinery, and refined petroleum products have surged as American buyers seek alternatives to Chinese suppliers.