The Congressional Budget Office (CBO) estimated on Friday (August 22) that the tariffs pushed by President Donald Trump will reduce the U.S. fiscal deficit by $4 trillion over the next 10 years. This data shows that tariff revenue can offset the fiscal pressures brought by the “Big and Beautiful Act” passed by the Trump administration this year.
According to CBO, by 2035, the new tariffs will shrink the U.S. federal government’s deficit by $3.3 trillion and reduce federal interest expenses by $700 billion.
CBO Director Phillip Swagel emphasized, “Therefore, changes in tariffs will reduce the deficit by a total of $4 trillion.”
The latest forecast surpasses previous estimates. In June, CBO estimated that tariffs would reduce the underlying deficit by $2.5 trillion and cut interest expenses by $500 billion. In comparison, the overall reduction in this estimation is much larger.
However, the “Big and Beautiful Act” pushed by the Trump administration this year is still expected to put certain pressure on the U.S. public finances, projecting an increase of $3.4 trillion in the deficit over the next 10 years.
In recent years, the U.S. public finances have continued to deteriorate. According to data from the U.S. Department of the Treasury, federal debt has reached $37.18 trillion, accounting for approximately 100% of GDP. Some financial management institutions have warned that this ratio has weakened the attractiveness of U.S. government debt.
Since Trump took office, tariff revenue in the U.S. has been rapidly increasing. Data from Oxford Economics shows that as of August, the average effective tariff rate in the U.S. has reached 16.7%, up from 15.1% in June.
However, CBO also cautioned that these data have certain limitations and risks.
The sustainability of the current highest tariff rates remains uncertain as negotiations with trade partners are ongoing and may face legal challenges.
CBO’s analysis does not factor in the impact of tariffs on the economic scale. Some economists anticipate that these tariffs could hamper growth. However, at the same time, tax reduction measures in the “Big and Beautiful Act” may stimulate economic development next year.
Director Swagel of CBO also stated that these estimates have “significant uncertainty” and “lack precedent.”
Nevertheless, this report still garners support for the Trump administration. Trump and U.S. government officials have long argued that tariffs will generate substantial revenue for the federal government, enough to offset the additional expenditures.
U.S. Treasury Secretary Scott Bessent stated on Tuesday that he expects tariff revenue this year to be “significantly” higher than previously assumed.
He emphasized to CNBC, “We will bring down the deficit-to-GDP ratio. Start paying down debt, and from that point forward, give back to the American people.”
Furthermore, credit rating agency S&P Global maintained its rating on U.S. government debt this week, citing that the tariff revenue of the Trump administration helps mitigate the impact of tax cuts and spending bills on the U.S. fiscal situation.
“Sustained broad-based revenue growth, including strong tariff revenue, will offset any fiscal losses caused by tax concessions and spending increases,” S&P Global stated.