The Congressional Budget Office (CBO) said Friday that tariffs imposed under the Trump administration will reduce federal deficits by $4 trillion over the next decade, a sharp increase from its June estimate of $3 trillion.
CBO Director Phillip Swagel said tariff revenue is expected to lower primary deficits by $3.3 trillion and reduce interest payments on federal borrowing by $700 billion through 2035. The rapid revenue growth has made tariffs a central piece of federal financing.
“Although there are many legitimate concerns over the tariffs – including their impact on the economy and the level of uncertainty they are creating – policymakers should not repeal them without an adequate replacement for the revenue loss,” the Committee for a Responsible Federal Budget noted.
Still, CBO acknowledged tariffs also shrink economic output. Swagel wrote that while tariff revenue reduces borrowing and supports private investment, higher costs dampen productivity and investment.
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