US Importers Pay Record $16.5 Billion as April Tariff Bill Lands
Daily revenue from US customs duties rose to a record $16.5 billion as American importers made monthly payments to the government for goods received in April.
That revenue, disclosed in Treasury Department data released Friday, reflects the full impact of President Donald Trump’s new universal tariffs for the first time. About two-thirds of importers pay customs duties in one monthly sum — the month after goods arrive in US ports — and the deadline for April payments was Wednesday.
If tariffs continue at the present rate, the data suggest that Trump will fall short of the $2 billion a day in tariff revenue he’s counting on to help pay for the record tax cuts included in a bill passed by the House of Representatives this week. (…)
The new levies being collected consist mostly of a 10% baseline tariff for most of the world, a 25% duty on steel and aluminum, and 25% on autos. The tariff rate on China was about 20% when Trump took office, hit a high of 145% and is now 51%. (…)
With monthly collections for April now accounted for, the Treasury will bring in at least $22.3 billion in customs duties and other excise taxes this month, the data show. (…)
There are only 2 ways for these billions in costs to trickle back into the economy: higher prices or lower profit margins. Likely both.
On the other side of the ledger, these billions will increase federal government revenues. The nonpartisan Committee for a Responsible Federal Budget (CRFB) currently estimates that Trump’s One Big Beautiful Bill Act of 2025 (OBBBA) would add $3.1 trillion in incremental debt over the next 10 years but that could decline to $0.4T with tariff revenues estimated at $2.7T by the Yale Budget Lab, or $2,800 per year in additional cost per household. But “given the negative output effects of the tariffs, there would be additional dynamic reductions in tax revenue as a result. Based on Congressional Budget Office rules-of-thumb, TBL estimates that these effects would total -$394 billion over the decade.”
Deficits don’t matter until they do, like now. No doubt that Moody’s downgrade of US Treasuries woke many people up.
Spending remains out of control (the chart below is based on CBO’s 2024 projections, not factoring in the House-passed bill, but story remains the same… spending grows faster than revenue & well-above historical average as Callum Thomas notes).
And US debt is exploding:
Long rates are rising everywhere…
…when leverage and coverage have deteriorated…
… even more so in smaller companies…
Source: @MikeZaccardi
… unnerving equity investors cognizant of history …
… right when equity/bond valuations are historically extreme …
… and the USD scarily weak …
… bringing the shorts back …
Source: MarketWatch
… even while retail investors show extreme confidence as Lance Roberts explains:
Monday was a record-setting day. Stocks opened down 1% on news that Moody’s downgraded the US credit rating to AA. While some perceived the downgrade as problematic, retail investors, aka individuals, bought stocks at the highest rate ever. Per JP Morgan, retail investors purchased a net of $4.1 billion of US stocks in the first three hours of trading. As their graph below shows, Monday’s retail buying stampede dwarfs prior instances.
Smart money (institutions and hedge funds) is aggressively selling this market while individual investors, aka dumb money, are aggressively buying. The difference in opinions is stunning.
The data below confirms that view, with the recent stretch of Hedge Fund short selling remaining unprecedented and reflective of some skeptics. Over the past 3 COT reports, Hedge Fund shorts surged ~$25bn – the largest amount for at least the past 10 years.
Viewed through another lens, Hedge Fund shorts as a percentage of total open interest reached 41% – the max dating back to February of 2021.
Typically, institutional investors tend to be right. However, in the short term, particularly over the last few years, retail investors have been heavy buyers of corrections. The only question is whether retail investors run out of money before institutions are forced to cover?
Corporate insiders, the smartest of the so-called smart money, are not back in as Barchart shows. They have been consistent net sellers since Liberation Day:
Insider Trading Activity – Follow the Smart Money
Wait, wait:
Ed Yardeni Says It’s Not as Bad as You Think
Think it’s all over for US markets? Think they’re finally going to sink under high valuations, inflated expectations and now a nervous bond market? Maybe think again, says Ed Yardeni of the eponymous firm Yardeni Research, who joins this week’s Merryn Talks Money.
“I’ve been doing this for 45 years, and for that entire period the naysayers, pessimists and doomsayers have been saying that this time we are finally going to have to pay the price for our sins [of borrowing],” Yardeni says. But as he tells host Merryn Somerset Webb, it mostly turns out fine.
Even as everyone works themselves up about the world’s problems, stock markets are mostly near record highs. And for all the endless talk about a US recession over the last three years, it just hasn’t happened. The truth is that the US consumer is as resilient as they come, he says.
The baby boomers have some $80 trillion in net worth. They’re both spending it and giving it to their kids to spend. At the same time, US investors seem to have developed a long-term mentality: they see sell-offs as opportunities rather than “freakout situations.”
All of this makes perfect sense to Yardeni: others may be wobbling on the Magnificent Seven, but he is not. They may have just had their own mini bear market but he sees those big tech companies as uniquely American, and with their huge cash flows and stunning innovations, genuinely exceptional. And beyond them are more extraordinary technological advances—artificial intelligence, autonomous cars, humanoid robotics and the like. These will drive growth and productivity to new heights in the US, he predicts.
Yes, it all comes down to the mighty US consumer. Americans are born to consume; give them money, they will spend it unless really constrained:
Nominal consumer spending is still running +5.5% YoY while aggregate payrolls (employment x hours x wages) are rising 5% YoY. Retail sales have even reaccelerated lately.
This in spite of historically low expectations …
Spending and sentiment link remains robust
… particularly about jobs and inflation:
Households expect unemployment will climb
Source: Macrobond, ING
These may be soft data, they nonetheless reflect serious concerns for most people. Consumer sentiment indicators suggest an economic cliff right ahead. Americans are thus not blind or unconscious.
But however anxious they may be about the future, things are simply pretty good, now. Calm before the storm?
The critical hard data is still ok:
- unemployment claims are not spiking;
- the Sahm Rule is stable at 0.27, still far from the 0.50 trigger (which did not work at 0.57 last August);
- corporate profits are still booming, keeping CFOs happy;
- inflation numbers are not threatening real income yet;
- oil prices are down 21% YoY;
Trump’s backtracking was a relief, but we’re not out of the swirl just yet and tariffs are still up meaningfully.
U.S. Average Effective Tariff Rate
Awaiting more hard data, several investors, and FOMC members, are worried about
- the economy (recession or soft landing);
- inflation;
- the Administration;
- the USD
Hubert Marleau offers other potentially positive avenues:
Debt held by the public now stands at $28.9 trillion, about 100% of the N-GDP: more worrisome is that total debt outstanding is now around 130% (Only Australia, New Zealand, Canada, Denmark, Sweden, Luxembourg, Germany, Norway, Singapore, and Switzerland have better ratios, thereby meriting the top grade). As a consequence, the fiscal deficit ran at 6.5% of N-GDP in 2024, a level not seen outside of wartime periods. By all accounts, an amelioration in the US’s credit standing is out of the question for now: DOGE is tapering off, and the “Big, Beautiful Tax Bill” (BBTB) currently worked on is worsening the fiscal outlook.
The Joint Committee on Taxation estimated that BBTB, including the renewal of the Tax Cut and Jobs Act of 2017, would increase the fiscal deficits by $3.8 trillion through 2034, equal to 1.1% of N-GDP, while the Bipartisan Policy Center calculated that if the “BBTB” were extended permanently, the deficit would be worse: $5.3 trillion higher, or 1.5% of N-GDP. That would take the debt/GDP ratio to either 8.1% or 8.5%, given the current run rate for 2025 of 7.0%. According to the Penn Wharton Budget Model, the “BBTB” would increase the “primary” deficit, which excludes interest costs, by $6.0 trillion over 10 years.
The fact is that this spending problem is unsolvable. Around 75% of it is mandatory: 60% on programs like social security, Medicare and Medicaid with another 13% covering interest of existing debt. The final 25% covers defence (12%), plus education and infrastructure (13%), all of it core expenditures.
(…) unless the promise of pro-productivity policies delivers the necessary growth path to rectify the twin-deficit issue. This is why Bessent is so keen on producing growth when considering the net national savings rate of the U.S. is -3.1% of N-GDP (-7.0% budget deficit +3.9% personal savings rate), according to Andrew Lees of Macro Strategic Partnership, who is of the opinion that the only way to arrest the fiscal deficit problem with some political acceptance is through pro-growth public sector spending. Counterintuitively, he’s gambling that public sector deficits will become private sector savings, like they did during the Covid-pandemic, and that higher tax receipts will come from more people in the workforce with the help of more productivity, like it did during the 1990s.
This is more than a mere possibility. In this connection, investors should watch the market behaviour of the exchange value of the greenback and long-dated Treasury yields for answers, because that is where funding problems would show up first, if it were to come to that. It will indeed become increasingly important to monitor these two markets because the trajectory of trade and debt has become so interwoven that they will graphically illustrate foreign appetite for US Treasuries, US dollars, and US risk assets.
At present, so-called forex and bond vigilantes are running the show, because they are effectively an outside branch of the government, which has as much veto power as Congress and is therefore able to impact final decisions. (…)
Investors should also be conscious that the extension of the 2017 tax reform and technology infrastructure spending are also big features in Washington that could catapult into more productivity growth, especially if the Administration decides to ditch the reciprocal tariff proposal. With a bit of luck, it is even conceivable the US could upgrade to a 3-plus-3 economy from 2-plus-2: that is 3% for growth and 3% for inflation.
How lucky do you feel given current valuation levels amid such uncertainty?
This seems like a giant tug of war between gloomy surveyed Americans (with Republicans vs Democrats and Independents), cautious institutional investors (foreigners?) and buoyant retail investors (all Republicans?).
EARNINGS WATCH
From LSEG IBES:
476 companies in the S&P 500 Index have reported earnings for Q1 2025. Of these companies, 76.1% reported earnings above analyst expectations and 18.9% reported earnings below analyst expectations. In a typical quarter (since 1994), 67% of companies beat estimates and 20% miss estimates. Over the past four quarters, 77% of companies beat the estimates and 17% missed estimates.
In aggregate, companies are reporting earnings that are 6.5% above estimates, which compares to a long-term (since 1994) average surprise factor of 4.3% and the average surprise factor over the prior four quarters of 6.8%.
Of these companies, 62.7% reported revenue above analyst expectations and 37.3% reported revenue below analyst expectations. In a typical quarter (since 2002), 62% of companies beat estimates and 38% miss estimates. Over the past four quarters, 62% of companies beat the estimates and 38% missed estimates.
In aggregate, companies are reporting revenues that are 0.9% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.3% and the average surprise factor over the prior four quarters of 1.2%.
The estimated earnings growth rate for the S&P 500 for 25Q1 is 14.0%. If the energy sector is excluded, the growth rate improves to 16.0%.
The estimated revenue growth rate for the S&P 500 for 25Q1 is 5.0%. If the energy sector is excluded, the growth rate improves to 5.4%.
The estimated earnings growth rate for the S&P 500 for 25Q2 is 5.8%. If the energy sector is excluded, the growth rate improves to 7.7%.
Q2 earnings are now seen rising 7.7% ex-Energy, down from +8.6% on May 2 but investors remember that Q1 earnings were expected to rise 8.0%…
… and surely notice that guidance for Q2 is pretty steady:
Ed Yardeni:
We still believe that Trump needs to declare victory in his trade war before the end of the summer to avoid a recession later this year that might threaten the Republicans’ current slim majorities in both houses of Congress come next year’s midterm elections. The risk is that he won’t do so and that TTT will continue to weigh on S&P 500 forward earnings per share, which has stalled at a record high around $278 for the past several weeks (chart). To get to 6500 on the S&P 500 by the end of this year, we need forward earnings to climb to $300 with a forward P/E of 21.7.
TECHNICALS WATCH
The 13/34 week EMA’s March 31 downtrend signal might reverse amid high volatility and erratic policies we’re all getting used to 
. Ed Yardeni says that “stock investing is likely to continue to be like riding a mechanical bull in rowdy sports bar.”
Source: Stockcharts.com via Trade Signals
Healthcare stocks have put in one of their worst performances vs the index ever (healthcare stocks suffering from RFK MAHA threats, and Trump EO on drug pricing). (Callum Thomas)
Source: @sentimentrader
The Trump administration’s expansive tariff agenda is expected to increasingly focus on pharmaceuticals in the coming months, with the goal of addressing national security risks, creating domestic jobs, and onshoring of profits.
In a new video, Marta E. Wosińska explains that the actual effects of pharmaceutical tariffs are likely to be quite different.
To learn more about pharmaceutical tariffs, prescription drug shortages, and supply chain reliability, explore Marta’s related research here.
Oil chiefs warn of end to US shale boom Companies cut spending and idle their drilling rigs despite Donald Trump’s pledge to ‘unleash’ production
(…) Oil output will fall by 1.1 per cent next year to 13.3mn barrels a day, according to S&P Global Commodity Insights, as prolific shale drillers that made the US the world’s biggest producer idle rigs in the face of prices driven lower by fears of oversupply and Trump’s trade war. (…)
Scott Sheffield, the former head of shale driller Pioneer Natural Resources, told the Financial Times that if crude drops to $50 a barrel, US production would probably lose up to 300,000 barrels a day — more than the total output of some smaller Opec members. (…)
Tariffs have pushed up the prices of steel and aluminium — crucial inputs in the oil patch. The price of casing, the metal used to line wells and the largest expense to drill a well, has risen 10 per cent in the past quarter alone. “The economics will be challenged. We’ll see more capital pullback as the quarters progress,” said Doug Lawlor, chief executive of Continental Resources, one of the country’s biggest privately held energy companies. (…)
US Tariffs Loom Over Asia Summit as Ties With China Strengthen
Southeast Asian leaders start two days of talks from Monday, seeking to deepen ties with China and Gulf nations, and mitigate the fallout from US President Donald Trump’s tariff hikes.
Trade and economic cooperation will likely dominate the agenda of the 10-nation Association of Southeast Asian Nations summit taking place in Kuala Lumpur, along with conflicts in Gaza and Myanmar.
While the first of the two Asean summits held annually is usually reserved for Southeast Asian leaders, China is sending its No. 2 official, Premier Li Qiang. The leaders of the Gulf Cooperation Council nations, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates will also be in attendance. By contrast, the US and other Western nations won’t be represented.
For Malaysian Prime Minister Anwar Ibrahim, the summit he’s hosting is a chance to foster trade ties at a time nations with large surpluses with the US are on the hunt for new investment opportunities abroad. China is warning partners to avoid any deal with the US that comes at Beijing’s expense, leaving Asean members to walk a delicate balance between the world’s two top economies. (…)
Trade between China and Asean nations reached $982.3 billion last year, according to a report by state-run Xinhua News Agency. By comparison, US goods trade with the region totaled $476.8 billion in 2024 — $352.3 billion of which were American imports from the region, official data shows.
The summit comes weeks after Chinese President Xi Jinping visited Vietnam, Malaysia and Cambodia, during which he pitched for a unified “Asian family” — an apparent effort to counter US pressure on nations to limit trade ties with Beijing. (…)
Indonesia became a full member of the Russia and China-led BRICS group of developing nations earlier this year, with Malaysia, Vietnam and Thailand given partner nation status. Last week, Asean and China concluded talks to upgrade a free trade pact that includes chapters on digital and green economies and small and medium-sized enterprises, according to Chinese state media.
“I see this as a very good opportunity for us to show that Malaysia is a neutral country that wants to trade with any country that would like to trade with us,” Malaysian Communications Minister Fahmi Fadzil told reporters of the summit.
Back in Washington, negotiators from several countries in the region are working on deals to avert some of the highest tariff hikes announced last month by Trump. Whether those efforts will pan out are unclear and the US rejected a Malaysia-led attempt to negotiate as a bloc, according to local reports.
(…) more than 90% of goods traded in the region are already tariff-free. (…)
John Authers today has this chart demonstrating that isolating China is not working as expected:
China Premier Calls on Asean, Gulf States to Create ‘Big Market’
Chinese Premier Li Qiang rallied a group of Southeast Asian and Gulf states to deepen cooperation, as the Asian nation ramps up its charm offensive abroad to counter US efforts to isolate the economy.
“We should firmly expand regional opening up and develop a big market,” Li said at a meeting with leaders from Southeast Asia and the Middle East in Kuala Lumpur on Tuesday. “We should effectively manage differences in the spirit of mutual understanding.”
The inaugural joint summit offers Beijing yet another chance to sway countries caught between the world’s two largest economies. Li’s visit to Southeast Asia comes on the heel of President Xi Jinping’s tour last month, when he called for a united Asian family in an apparent effort to counter US containment.
“Countries of the three sides are at different stages of development, yet we should not let these differences stand in a way of our cooperation, but transform them into complementary strength that we can harness,” China’s No. 2 said. (…)
Malaysian Prime Minister Anwar Ibrahim, making his opening remarks at the Asean-GCC-China Summit, highlighted the region’s combined GDP of $24 trillion as he expressed a message of unity.
“This collective scale offers vast opportunities to synergize our markets, deepen innovation and promote cross-regional investment,” Anwar said. (…)
Li visited Indonesia before Malaysia. In his meeting with President Prabowo Subianto, Li called for more cooperation and cited rising protectionism.
Their central banks signed a MOU on a framework for bilateral transactions in local currencies on Sunday, while wealth funds China Investment Corporation and Danantara Indonesia entered an investment agreement.
Greenland says it will turn to China if US and EU shun its mining sector
(…) Nathanielsen said the new four-party coalition government in Nuuk was ‘‘first and foremost committed to creating development for Greenland and Greenlanders” and would prefer to work with “allies and like-minded partners”.
But she added that Greenland was “having a difficult time finding our footing” in the changing nature of the western alliance. “We are trying to figure out, what does the new world order look like? In those terms, Chinese investment is of course problematic, but so, to some extent, is American,” she said. “Because what are the purpose of [the US investments]?”
The EU is a “good fit” for Greenland as it had few of the minerals it needs itself, Nathanielsen added, as well as being aligned on environmental metrics.
China Raises Cross-Border Yuan Use Requirement for Major Banks
China’s central bank asked its major lenders to raise the share of yuan when facilitating cross-border trade, in its latest push for the use of the currency as the world grapples with the onslaught of tariffs by the US.
The People’s Bank of China increased the floor ratio for yuan-denominated trade transactions to 40% from 25% as part of its recent adjustment to the so-called Macro Prudential Assessment, according to people familiar with the matter, who asked not to be identified discussing a private matter. While not mandatory, banks missing the ratio often receive a lower score in regulatory review which will impact their future business expansion.
The sharp increase highlights Beijing’s determination to accelerate the use of the yuan in global trade and may have a significant impact on demand for the currency just as Trump’s sweeping tariffs raised concerns about the international appeal of dollar-based assets.
China’s imports and exports of goods amounted to 43.8 trillion yuan ($6.1 trillion) in 2024. The proportion of cross-border yuan payments in goods trade reached 30%, central bank Governor Pan Gongsheng said in January.
China has been actively advancing the cross-border use of the yuan through various initiatives over the past few months. (…)
A $20,000 ‘Home Companion’ Robot From China to Debut This Year
China’s UBTech Robotics Corp. is planning to unveil a $20,000 humanoid robot that can serve as a household companion this year, seeking to expand beyond factories.
The company sees “home companion” robots as a bright spot in China partly because of the growing need for elderly care, Chief Brand Officer Michael Tam told Bloomberg News in an interview on Friday. Still, he didn’t give a timing for when the product goes on sale and said an all-purpose robot that can handle many types of household chores and look after human beings is years away as the technology isn’t ready. (…)
Elon Musk said last year Tesla’s Optimus robot will handle many household tasks and could eventually be available to consumers for $20,000 to $30,000 each, with production starting in 2026. (…)
Tam said intense rivalry helps Chinese firms become more efficient.
“White-hot competition creates a lot of pressure on a single company, but for the whole industry, it does help preserve good companies and eliminate bad ones,” Tam said.