• Treasury Secretary Scott Bessent plans to use projected 2025 tariff revenue, estimated at over 1% of GDP, to directly pay down the national debt.
  • A novel revenue-sharing deal with Nvidia and AMD on chip exports to China will also contribute funds for debt reduction, bypassing standard taxation.
  • The strategy, part of a broader push for "tax sovereignty," faces legal and political scrutiny over executive authority and risks trade retaliation.

Treasury Secretary Scott Bessent announced a significant shift in U.S. fiscal policy on Thursday, detailing plans to channel all revenue from import tariffs—projected to be “well in excess of 1% of GDP” for 2025—toward paying down the national debt and lowering the deficit-to-GDP ratio. The move represents a core tenet of the administration's economic strategy to fund government operations through trade measures while preserving tax cuts for individuals.

In a notable development, Bessent publicly revised the 2025 tariff revenue estimates upward, highlighting what he characterized as the significant and previously underestimated fiscal impact of the administration's trade policies. The strategy extends beyond traditional tariffs to include unconventional, executive-brokered deals. A recently negotiated arrangement with semiconductor giants Nvidia Corp. and Advanced Micro Devices Inc. involves a revenue-sharing scheme on certain chip exports to China, structured not as a standard tax but as a condition of their export licenses. According to people familiar with the matter, proceeds from this unique agreement will also be directed straight to debt reduction.

The administration frames the approach as a cornerstone of its push for "fairer trade" and U.S. "tax sovereignty," arguing it simultaneously protects American businesses from foreign targeting and strengthens the nation's balance sheet. However, the tactic of negotiating corporate revenue-sharing deals outside normal legislative channels has ignited a fierce debate among legal scholars and lawmakers concerning the limits of executive power in trade and fiscal matters. There is little historical precedent for such targeted arrangements acting as a substitute for standard taxation.

While the near-term fiscal boost has been noted by rating agencies—S&P recently affirmed the U.S. credit rating—economic experts warn of longer-term headwinds. The reliability of tariff revenue is uncertain if trading partners shift suppliers or find alternatives, and the policy carries a substantial risk of provoking retaliatory trade actions that could disrupt global supply chains. Furthermore, a proposed “External Revenue Service” to administer these new revenue streams has reportedly stalled amid internal disputes, raising immediate questions about the operational implementation and oversight of the entire endeavor. A Treasury spokesperson did not immediately respond to a request for comment on the agency's status.

The policy's implications are already rippling beyond U.S. borders, with more than 70 nations now seeking trade negotiations with Washington. For now, the administration is betting that the combined force of tariffs and bespoke corporate deals will provide a durable revenue base to tackle the national debt, a calculation that markets and trading partners will be watching closely.