President Donald Trump’s increased tariffs on U.S. imports could reduce the national deficit by $4 trillion over the next 10 years, according to the Congressional Budget Office (CBO).
The CBO estimates that tariff-related revenue could shrink primary deficits by $3.3 trillion and reduce federal interest payments by $0.7 trillion.
The big picture: These projections assume continuation of tariff hikes globally, though current top tariff rates may fluctuate due to ongoing negotiations and legal challenges.
- The additional revenue from tariffs may help offset an estimated $3.4 trillion increase in the deficit caused by the Republicans’ recently passed tax-cut and spending bill.
- The U.S. federal debt currently stands at $37.18 trillion and has grown under both Republican and Democratic administrations amid continual government spending exceeding revenue.
What we’re watching: A government funding deadline looms at the end of September, raising the risk of a shutdown if spending bills are not passed.
Driving the news: The CBO’s latest forecast has increased compared to June, when deficit reductions were estimated at $2.5 trillion for primary deficits and $0.5 trillion for interest payments.
- U.S. average tariff rates rose from 15.1% in June to 16.7% in August, with over $26 billion in duties collected this fiscal year, sharply up from the previous year’s hundreds of millions.
