Trump's retreats on tariffs have already wiped out $800 billion of expected deficit reduction, CBO estimates | Fortune

"The Congressional Budget Office (CBO) has released new projections showing that recent rollbacks of President Donald Trump's aggressive tariff strategy have wiped out roughly $800 billion in expected debt reduction over the next decade. This revision comes even as tariffs remain a central point of debate in U.S. fiscal policy, particularly with the national debt exceeding $38 trillion and deficit reduction an urgent concern for lawmakers and economists alike."

"According to the CBO's updated baseline budget projections, the expected impact of tariff policy on U.S. deficits has fallen sharply since its last projections on tariff revenue in August. At that point, an effective tariff rate of 20.5% implied future deficit reduction of $3.3 trillion through 2035, and about $700 billion in interest savings. However, since June, the scope and magnitude of these tariffs have shifted significantly."

"The CBO points out that these substantial debt-reduction projections are highly sensitive to the fate of tariff policy-a policy area marked by political volatility and economic uncertainty. Trump initially touted tariffs as a tool to bring down the ballooning federal debt and, as recently as August, claimed that the policies would generate revenue far exceeding government projections. The CBO calculated reduced tariffs from five separate announcements with various trading partners, announced between early September and early November."

CBO projections show recent rollbacks of tariffs reduced expected deficit reduction by about $800 billion over the next decade. Earlier projections at a 20.5% effective tariff rate implied $3.3 trillion in deficit reduction through 2035 and roughly $700 billion in interest savings; the revised 16.5% effective rate implies $2.5 trillion in deficit reduction and $500 billion in interest savings. Changes reflect softened tariffs with trading partners including China and the EU and five tariff-reduction announcements between early September and early November. The fiscal outlook is highly sensitive to further political and economic shifts in tariff policy.

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