Donald Trump tariff impact: CBO trims deficit-cut estimate by $1 trillion; revised data, rate changes drive downgrade

The Congressional Budget Office has lowered its projection of how much President Donald Trump’s tariff increases will reduce US budget deficits over the next decade.

The non-partisan agency now expects the duties to cut deficits by $3 trillion through 2035, down from the $4 trillion estimated in August, as per news agency Reuters.

According to the latest assessment, all tariffs imposed between January 6 and November 15 would reduce primary deficits by $2.5 trillion if maintained until 2035.


Lower government borrowing would save an additional $500 billion in interest payments. The CBO said the revision was largely the result of newly available data, with the rest reflecting recent tariff adjustments by the administration.

CBO director Philip Swagel said “roughly two-thirds of the downward revisions” were due to updated figures, while changes to tariff rates since August also affected the outlook, reported Bloomberg.

Some US courts have ruled the administration exceeded its authority in imposing the duties, with the Supreme Court now reviewing those decisions. Critics have argued that tariff costs are ultimately borne by consumers, while Trump has maintained the measures have created a financial gain for the Treasury.

As per Bloomberg, the CBO’s new projection means expected tariff revenue would not fully offset the government’s earlier assessment that Trump’s tax-cut law would add $3.4 trillion to deficits over 10 years.

The agency also said it now estimates the effective tariff rate to be around 14 percentage points above last year’s level, compared with an 18-point rise estimated in August.

The adjustment follows a series of trade deals and rate reductions intended to curb price increases on certain goods.

As per Axios, the revised projection returns the CBO’s estimate to its June level, after it had been raised in August. Axios also reported that more than a third of US imports are now unaffected by tariff changes introduced this year.

The White House, in a statement cited by Axios, said the tariffs would generate “trillions in revenue,” claiming foreign exporters would bear the costs.

Trump has continued to promote the idea of $2,000 “tariff dividend” cheques, although many lawmakers prefer using the revenue to narrow deficits.

Any ruling by the Supreme Court against key tariff actions would alter revenue expectations, though economists expect the administration would attempt to reintroduce the duties through other means, as per Bloomberg.


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