- President Trump says his tariff revenues will both pay down America’s $37 trillion debt and possibly fund a public “dividend,” but Treasury data shows they fall short of even covering monthly interest costs. In exclusive interviews with Fortune, professor Joao Gomes of the Wharton School and AEI’s Desmond Lachman warned that while tariffs may slow debt growth, they won’t meaningfully reduce it. Markets are largely skeptical of Trump’s math despite some unconventional revenue wins.
President Trump has a two-pronged plan for the proceeds of his tariff regime. Firstly, he says, it’s going to pay down America’s $37 trillion national debt. Secondly, he’s considering sharing the spoils with the public.
“The purpose of what I’m doing is primarily to pay down debt, which will happen in very large quantity,” Trump told the media earlier this month. “But I think there’s also a possibility that we’re taking in so much money that we may very well make a dividend to the people of America.”
The plan sounds welcome, in theory. But there’s just one problem. At present, tariff revenues don’t even cover the interest on the debt—let alone reduce its overall size.
According to Treasury data seen by Fortune, the accrued interest expense on Treasury notes in July alone was $38.1 billion. Add to that $13.9 billion in interest on Treasury bonds, $2.85 billion on Treasury floating rate notes (FRN), and a total of $6.1 billion across Treasury inflation-protected securities (TIPS) assets. The bill is eye-watering: The total comes to $60.95 billion for the month.
By contrast, Treasury statements show that tariffs only brought in $29.6 billion to offset it. An impressive figure, but still not enough to rival interest payments.
Of course, the White House could pay off some of its debt and reduce interest payments by deploying the tariff revenues directly to the bottom line. Governments have a number of ways to pay off debt, either by paying off bonds at maturity instead of rolling them over, or launching a buyback scheme in order to retire the bonds and reduce total outstanding debt.
It seems that the White House is not yet enacting a plan for the latter option. A tentative schedule of buyback operations for August 2025 shows the Treasury intends to spend nearly $40 billion buying back various security types and maturity ranges. However, compared with a similar schedule from August last year, this is $10 billion less than the Biden administration had accounted for.
Looking forward, if the Trump team does intend to pass through circa $30 billion a month toward offsetting the national debt, it would have accrued a gargantuan $360 billion payment over a year. This figure is less than 1% of America’s national debt, at the time of writing.
Of course, those on the bullish end of the economic scale are unconcerned by the notion of paying off national debt because a) the bond market forms a core part of the economy, b) the U.S. could grow its way out of any default or debt crisis, and c) the nation is in control of its own fate because its central bank has the ability to ease the cost of borrowing.
Nonetheless, warnings are coming from some of the most significant corners of the economy. In the private sector, JPMorgan Chase CEO Jamie Dimon believes America is barreling toward a predictable crisis; in the public sector, Fed Chair Jerome Powell believes it’s time to have an “adult conversation” about debt.
And the president himself is clearly aware of the issue, pushing efficiency and cost-cutting to bring down deficits. The only problem is, economists can’t quite figure out his math.
The White House told Fortune: “America’s debt-to-GDP ratio has actually declined since President Trump took office—and as the administration’s pro-growth policies of tax cuts, rapid deregulation, more efficient government spending, and historic trade deals continue taking effect and America’s economic resurgence accelerates, that ratio will continue trending in the right direction.
“That’s on top of the record revenue that President Trump’s tariff policies are bringing in for the federal government, and cooled inflation paving the way for interest rate cuts.”
Offsetting, not repaying
By Joao Gomes’s calculations, President Trump’s tariff regime is netting his expenditure at zero as opposed to improving the balance sheet.
The professor of finance and economics at Wharton, at the University of Pennsylvania (President Trump’s alma mater), believes the tariff income will offset the costs of the Oval Office’s “One Big Beautiful Bill Act”—estimated by the Congressional Budget Office to add $3 trillion to the debt by 2030—and not go much further.
“They leave the national debt picture similar,” Gomes told Fortune in an exclusive interview. “The idea that [tariffs are] going to pay down the national debt is, of course, greatly overstating it.”
That being said, Gomes notes tariffs are likely to have some useful dragging effects on the speed at which America’s national debt is accumulating. The White House said it expects its bill to reduce the much-watched debt-to-GDP ratio to 94% from its current standing of 121% by increasing economic growth.
“There’s no question of us paying down the debt,” Gomes added. “Every year the government needs $1.8 trillion of net new borrowing, so that number could go down. But before we have any questions about repaying we first need to close that gap—and $1.8 trillion is impossible to close … the best we could hope for is if the tariffs turn out to generate enormous amounts of revenue [and] reduce that annual budget gap, which would make the debt grow less quickly.
“The idea that somehow the debt is gonna go down, we’re gonna start buying things back and so on and reduce the debt in dollar terms is just unimaginable. We’ll never get that much revenue.”
Gomes was echoed by Desmond Lachman, a senior fellow at the American Enterprise Institute. He told Fortune in an exclusive interview: “[For Trump] to say that he’s going to raise maybe $300 billion is a drop in the ocean in relation to the amount of red ink they’ve got. The country’s on a really dangerous debt trajectory.”
Signals to markets
How much of a problem national debt proves to be ultimately comes down to foreign investors, and their confidence in the U.S. government’s ability to pay its bills. Approximately 26% of America’s debt is held by foreign countries, according to the Conference Board, presenting significant issues if those investors decide to take flight.
Lachman believes that while President Trump may be framing tariffs as bringing back jobs or paying off debt to be more politically palatable, investors will see through the rhetoric. “Markets aren’t dumb. They can do the arithmetic and figure out that this is nonsense,” he said.
The former deputy director for the International Monetary Fund’s (IMF) Policy Development and Review Department added that the continued flight to gold (prices are up 27% over the past year) is indicative that markets no longer view U.S. Treasuries as the ultimate safe haven.
“People are worried that this government’s not serious about economic policy,” Lachman said. “Trump can say what he likes. A comment I think is great is: One thing about the bond markets is that they can’t be primaried. In bond markets, the money’s gonna move. People just want to protect their cash; they’re not afraid of being bullied by Trump if the numbers don’t add up.”
Counter to Lachman’s point is the fact that Treasury yields have stayed relatively flat over the past couple of years. The 10-year is at around 4.3%, and was the same in late October 2022, while the 30-year has hung around the 4.8% mark since 2023.
Because of this, Gomes believes the market isn’t alarmed by the Trump team’s unorthodox methods of balancing the debt. He noted: “There’s interesting and peculiar things about this that we’ve all noticed. For example, the news earlier this week that Nvidia is gonna give effectively a 15% tax to the federal government for any exports to China certainly brings an extra source of revenue to the government that is not going to be small.
“The ability of this president and this administration to find strange ways” to generate revenue may convince markets of Trump 2.0’s sincerity when it comes to the debt, Gomes added. “I’m not sure I would discount that ability to continue to do things that I would not support, and I don’t think [are] great ideas, but at the end of the day, you cannot deny that they bring strange forms of revenue that do change the debt picture.”
And while there are two ends of the spectrum on who will end up paying for the tariffs (at one end Trump, saying it will be foreign nations; at the other end the likes of Goldman Sachs saying the majority of the cost will be paid by U.S. consumers), the administration is proving it can “extract revenues.”
“Whatever you think of the methods,” Gomes added, “if it’s an issue, they can find ways to do this.”
A turning point?
National debt is often described as a game of chicken played by one administration then the next, adding to the debt and risking crisis instead of introducing potentially unpopular policy to address it (austerity).
Trump’s unusual approach to revenue generation shouldn’t be viewed as an end to that game, said Gomes, but merely a delay of any reckoning. “It seems clear that suspicious as [markets] are of the policies, they feel confident that that’s not going to happen at the moment,” the economist said. “We would need something, some other event of some type—a serious war or conflict—the things that really change paradigms” to prompt such a crisis, he added.
The Conference Board is not so convinced. “The debt crisis is here,” it said in a note shared with Fortune, outlining a six-step program to reduce the debt-to-GDP ratio to 70% within 20 years. This includes, among a range of ideas, establishing a bipartisan committee for fiscal responsibility; enacting tax reform to increase revenues in a fair way; and developing a package of reform for Social Security.
