WASHINGTON, D.C. — The Congressional Budget Office now projects the federal deficit will reach $2.1 trillion in fiscal 2026, roughly $200 billion more than it estimated in February.
The largest revision came from weaker-than-expected tariff revenue. After the Supreme Court struck down tariffs imposed under emergency powers, the government refunded about $100 billion of the duties it had collected, while newer tariffs have generated less revenue than previously assumed. CBO now expects customs duties to come in about $250 billion below its earlier forecast.
Through the first 10 months of the fiscal year, federal revenues rose by $139 billion compared with the same period last year, but spending increased by $308 billion. Adjusting for timing shifts caused by Aug. 1 falling on a weekend, the deficit still stands about $71 billion higher than during the same period in fiscal 2025.
The largest spending increases came from Social Security, Medicare and Medicaid, along with sharply rising interest costs. Net interest on the national debt increased by $117 billion as federal borrowing continued to climb and long-term interest rates remained elevated.
Corporate tax receipts fell by $89 billion, partly because the One Big Beautiful Bill Act allowed larger deductions for certain business investments.
The revised forecast underscores a basic contradiction in the administration’s economic message: Trump has repeatedly touted tariffs and tax cuts as fiscal strengths, while CBO now says both are contributing to weaker revenues and a deficit headed above $2 trillion.
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