Trump's Tariffs Widen Budget Deficit
CBO projects the 2026 budget deficit will reach $2.1 trillion.
1Decline in Tariff Revenue
The Congressional Budget Office (CBO) announced that tariff revenues are declining faster than expected. The Supreme Court's rejection of the Trump administration's authority to impose tariffs means tariff and customs revenues will be $250 billion lower in 2026. This has significantly widened the budget deficit.
2Increase in Budget Deficit
CBO estimates the fiscal 2026 budget deficit will reach $2.1 trillion. This is $200 billion higher than the February estimate of $1.9 trillion. While federal spending is close to February projections, the increase in the deficit is almost entirely due to declining revenues.
3Impact of Supreme Court Ruling
The Supreme Court's February 20 ruling rejected the Trump administration's authority to impose tariffs under the International Emergency Economic Powers Act. This decision caused a 60% drop in tariff revenues. Refunds tied to the ruling began flowing in May.
4Other Revenue Changes
Income and payroll tax collections were $75 billion above February projections, partially offsetting the decline. However, other revenue streams were $25 billion below projections. This resulted in a net revenue gap of approximately $200 billion.
5Rising Debt
In the first 10 months of the fiscal year, $1.8 trillion was borrowed. In July alone, $431 billion was borrowed, equating to nearly $6 billion per day. Borrowing is on track to exceed $2 trillion this fiscal year despite the absence of a recession.
6New Tariff Regime
Following the Supreme Court ruling, the administration used temporary authority under Section 122 of the Trade Act of 1974. This authority expired on July 24, and tariffs were then shifted to Section 301 of the same law. CBO expects the new regime to recoup a substantial share of the losses but not all.
7Increase in Spending
Social Security outlays rose by $70 billion, Medicare by $66 billion, and Medicaid by $45 billion. Net interest on public debt jumped by $117 billion. Defense Department military spending increased by $39 billion, and Veterans Affairs outlays rose by $34 billion.
8The Bigger Picture
The report underscores the central role of tariff policy in the government's fiscal trajectory and how exposed this revenue stream is to legal and political risks. Tariffs were pitched as a meaningful offset to the cost of tax cuts, but the Supreme Court ruling has scrambled that math.
Original article: Fortune — Trump'ın Tarifeleri Bütçe Açığını Artırdı