Trump is bringing in enough revenue from tariffs to cut deficits by $4 trillion over the next decade, CBO says

Updated CBO estimates project tariff hikes will generate enough revenue to reduce federal deficits by $4 trillion over the next decade. Effective tariff rates rose about 18 percentage points versus last year, with many tariffs targeting imports from China, Mexico, Canada, the EU, automobiles, steel, and other goods. If rates persist, primary deficits would fall by $3.3 trillion and interest payments by $700 billion. The change substantially revises June estimates, which had smaller projected savings. Projections use Census, Customs and Border Protection, and Treasury data. Legal challenges and trade negotiations could alter future tariff revenues.

President Donald Trump's hike in tariffs is projected to generate enough revenue to cut federal deficits by $4 trillion over the next decade, according to the latest analysis by the Congressional Budget Office (CBO). The nonpartisan agency said it had updated its estimates of tariff revenues as part of the development of the short-term economic forecast covering 2025 to 2028, to be published on September 12.

The CBO report found that increased tariffs-many targeting imports from China, Mexico, Canada, and the European Union as well as automobiles, steel, and other goods-have raised effective tariff rates by about 18 percentage points compared to last year. If these rates remain, primary deficits would shrink by $3.3 trillion and interest payments would fall by another $700 billion, bringing the total deficit reduction to $4 trillion over 10 years.

This marks a substantial revision from the CBO's June estimates following recent hikes in tariff rates and broader coverage across key imports, when the agency projected a $2.5 trillion decrease in primary deficits and $500 billion reduction in interest outlays in a report that examined the effects of the tariffs implemented between January 6 and May 13, 2025. The CBO said it used the same methods to generate the projections, mainly based on data from the Census Bureau, Customs and Border Protection, and the Treasury.

Read at Fortune