President Donald Trump’s tariffs are projected to temporarily help constrain federal deficits despite the massive cost of Republicans’ tax and spending law, according to new estimates by the nonpartisan Congressional Budget Office.
The One Big Beautiful Bill extended and expanded sweeping income tax cuts, increased the standard deduction, implemented new tax cuts for businesses, and poured more money into defense and immigration enforcement.
That law is expected to increase federal deficits by $4.7 trillion over the next 10 years, the CBO reported in its annual budget projection released Wednesday, including interest costs and impacts on the economy. The Trump administration’s mass deportation efforts have also increased projected deficits slightly by $0.5 trillion because immigrants leaving the country reduces the labor force.
But those costs have been partially offset by Trump’s tariffs on imports from other countries, which reduced projected deficits by $3 trillion, including their effects on the economy. The CBO also reported that inflation will be higher over the next three years than previously expected because of tariffs and that tariffs will “continue to weigh on growth by raising the cost of imported goods, reducing investment from abroad, and lowering the efficiency of the U.S. economy.”
CBO estimated that U.S. debt will rise every year over the next decade, going from 101 percent of GDP this year to more than 120 percent of GDP by 2036 — the highest percentage in the nation’s history.
The report noted that the large and growing national debt could have several consequences, including rising borrowing costs that could slow investment, rising interest costs, eroded confidence in the U.S. dollar as the international reserve currency and increased risk of a financial crisis.
Real GDP is expected to grow slightly in 2026 as the Republican tax law’s provisions begin to outweigh drag from higher tariffs and lowered immigration and as AI increases productivity, CBO reported, though growth probably will slow to a paltry 1.8 percent in 2027.
It’s unclear how much longer Trump’s tariffs will continue to affect the economy and bring in revenue, because the Supreme Court is considering a request that could block many of the tariffs.
The estimated deficit for 2026 is 8 percent greater than it was in the last annual projection, released in January 2025, according to CBO. The cumulative deficit over the next 10 years is expected to be 6 percent greater than last year’s estimates, though the projection assumes policy will remain unchanged.
House Budget Committee Chairman Jodey Arrington (R-Texas) disputed the findings in a statement Wednesday, arguing that Republicans have “made meaningful strides to restore our nation’s fiscal health.”
“I take great exception with CBO’s confoundingly low assumptions for economic growth,” Arrington said.
Democrats touted the report as evidence that Trump’s tariff policy isn’t working and highlighted the sweeping costs of the GOP tax law.
Republicans “have forfeited any right to lecture anyone about deficits,” said Rep. Brendan Boyle (Pennsylvania), the top Democrat on the House Budget Committee, adding that tariffs “operate as a national sales tax on American families, and Republicans should stop enabling this economic sabotage and start standing up for the people they represent.”
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