Trump is bringing in enough revenue from tariffs to cut deficits

Impact of tariffs on deficit

Wider economic context

Nick Lichtenberg is Fortune Intelligence editor and was formerly Fortune's executive editor of global news.

President Donald Trump’s hike in tariffs is projected to generate enough revenue to cut federal deficits

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

Higher tariff revenues mean less need for federal borrowing, resulting in significant savings on national debt interest payments. 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.

The study notes that tariff revenue could partially offset deficits caused

The federal debt currently stands at about $37 trillion, and analysts remain concerned about upward pressures on interest rates and borrowing costs due to rising debt levels. Lawmakers are also facing a government funding deadline at the end of September, which places added scrutiny on deficit management in upcoming fiscal debates.

Separately, the Committee for a Responsible Federal Budget (CRFB), a nonpartisan budget watchdog that sits outside the government, has calculated that Trump’s tariff regime, if kept permanent, could reduce the deficit

It’s an open question whether the tariffs will offset the impact of OBBBA, from a deficit standpoint. The CRFB has gamed out several scenarios—including the bulk of the tariffs being ruled illegal and thrown out

While Trump and supporters frame tariffs as a key tool for deficit reduction without raising taxes on U.S. households, critics caution about broader economic impacts, including higher consumer prices and trade tensions. The CBO indicates its projections assume ongoing tariff regimes, noting that changes in trade policy or international negotiations could alter the fiscal outlook.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.