Trump Tariff Policy Could Cut Federal Deficit by $4 Trillion Over 10 Years: CBO

President Donald Trump’s expansive tariff policy is projected to generate sufficient revenue to reduce the federal deficit by $4 trillion over the next decade, according to the Congressional Budget Office (CBO). This estimate is part of the CBO’s updated short-term economic forecast covering the period from 2025 to 2028. The analysis indicates that higher tariff rates—particularly on imports from China, Mexico, Canada, the European Union, and on steel and automobiles—have increased effective tariff rates by about 18 percentage points compared to last year [1].

If these elevated tariff rates remain unchanged, the CBO estimates that primary deficits would shrink by $3.3 trillion, while interest payments on the national debt would decrease by an additional $700 billion over the same 10-year period. This marks a significant revision from earlier forecasts, which had projected a $2.5 trillion reduction in primary deficits and $500 billion in interest savings based on tariff increases between January and May 2025 [1].

The CBO’s latest estimates incorporate data from the U.S. Census Bureau, Customs and Border Protection, and the Department of the Treasury. The agency emphasized that while its methodology has remained consistent, the broader and more sustained application of tariffs has led to a more favorable revenue outlook [1].

The projected tariff revenue could partially offset deficits caused by the “One Big Beautiful Bill Act,” which is expected to raise deficits by $3.4 trillion, according to the CBO. However, the agency noted that ongoing legal challenges and evolving trade negotiations could impact the long-term stability of tariff-related revenue [1].

The Committee for a Responsible Federal Budget (CRFB), an independent nonpartisan watchdog, also analyzed the impact of Trump’s tariffs and estimated a potential $2.8 trillion reduction in the deficit over the next decade if the policy remains unchanged. The CRFB described the generated revenue as both “meaningful” and “significant,” while cautioning that the financial outlook has deteriorated since January 2025 [1].

Economists and analysts remain divided on the broader implications of the tariffs. While Trump and his supporters argue that tariffs are an effective way to reduce deficits without raising taxes on American households, critics warn of rising consumer prices and potential trade tensions. The CBO’s projections assume that current tariff policies will remain unchanged, but any shift in trade strategy or international negotiations could alter the fiscal trajectory [1].

The U.S. federal debt currently stands at approximately $37 trillion, with lawmakers facing a government funding deadline at the end of September. This has intensified scrutiny over deficit management, particularly as the nation grapples with rising interest rates and borrowing costs [1].

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[1] Trump is bringing in enough revenue from tariffs to cut ... (https://fortune.com/2025/08/25/how-much-revenue-deficit-reduction-trump-tariffs-cbo-4-trillion/)