The Congressional Budget Office projects major revenue gains with moderate economic drag from the president’s sweeping tariff policies.
President Donald Trump’s tariffs would cut federal deficits by $2.8 trillion over the next decade, according to a new analysis by the Congressional Budget Office (CBO), which found that the fiscal gains from higher tariff revenues would far outweigh the slight drag on economic growth and modest uptick in inflation.
The tariffs imposed by Trump between January and May of this year on a range of goods would lower federal borrowing, reducing interest costs by $500 billion and bringing total deficit reduction to $3 trillion through 2035 before accounting for economic impacts, CBO said in a June 4 letter to Senate Democratic leaders. After factoring in the economic impact—slightly slower growth and higher prices—the total net reduction in projected deficits comes to $2.8 trillion.
The agency projects that real U.S. gross domestic product (GDP) will be 0.6 percent lower by 2035 than under previous baseline forecasts, which did not incorporate the tariffs. Inflation is expected to rise by an average of 0.4 percentage points in both 2025 and 2026, with the price impact leveling off thereafter. Still, despite the economic tradeoffs, the agency said the tariffs would leave the federal budget in significantly better shape over the long term.
The budget office’s model assumes that the tariffs, announced through executive action, will be in place permanently. It’s an assumption that CBO acknowledges is “subject to significant uncertainty,” given the possibility of policy changes or carveouts. Trump has already paused or modified portions of his latest tariff plans, and during his first term, many duties were paired with exemption programs for select importers.
“If such mechanisms are implemented again,” the agency wrote, “that could substantially reduce the tariff duties collected and thus the change in deficits associated with the policies assessed here.”
CBO also noted that the unprecedented scale of the current tariff increases makes it difficult to predict precisely how consumers and businesses will respond. Depending on how trade patterns adjust, actual revenue could fall short—or exceed—current projections, with the outcome tied to how responsive buyers are to price changes and how businesses reorganize supply chains.
The analysis incorporates likely retaliatory measures from U.S. trading partners, which CBO expects to be narrower in scope than the tariffs imposed by the United States. Even so, those foreign responses—combined with elevated policy uncertainty—are expected to exert a modest chilling effect on business investment and productivity growth.
“In CBO’s assessment, additional retaliatory tariffs are likely, and U.S. trading partners are probably waiting for negotiations to play out before retaliating fully,“ the agency noted. ”Even so, the value of U.S. exports targeted by those tariffs is expected to be lower than the value of imports targeted by U.S. tariffs,” CBO added, noting that the heightened uncertainty about the future path of the Trump administration’s trade policies would likely delay investment.
The latest projection is roughly in line with a previous estimate issued by CBO in December 2024, when Trump’s tariff policies were less clear. In that projection, CBO estimated that a combined scenario—including a 10 percent universal tariff on all imports and a 60 percent tariff on Chinese goods—could reduce federal deficits by up to $2.9 trillion over 10 years, while raising inflation by roughly 1 percentage point through 2026 and lowering real GDP by 0.6 percent by 2035.
The updated June 2025 letter reflects enacted policies rather than proposed ones, offering a more refined look at the fiscal and economic impacts now that the tariffs are in place—although some have been changed or paused since they were first announced.
In both sets of projections, however, the topline conclusion remains the same—the tariff regime, if sustained, would bring in significant revenue and lower deficits, while imposing relatively modest costs to growth and inflation.
The CBO’s letter comes on the same day that Trump’s 50 percent tariffs on steel and aluminum went into effect, doubling the previous 25 percent rate.
“Although the previously imposed steel and aluminum tariffs have helped provide critical price support in the United States market, they have not yet enabled these industries to develop and maintain the rates of capacity production utilization that are necessary for the industries’ sustained health and for projected national defense needs,” Trump wrote in a June 3 proclamation.
Trump said the increased tariffs would boost domestic steel production by more effectively countering foreign countries that dump their excess steel into U.S. markets at low prices, undercutting the competitiveness of the domestic industry.
Since taking office, Trump has launched a bold tariff agenda, with the president basing his policies on the argument that tariffs are an effective way to reset global trade ties in a way that levels the playing field and corrects decades of the United States being taken advantage of by other countries.
Critics say the tariffs impose costs on consumers and businesses, which, along with economic and legal uncertainty, have the potential for significant disruption.
Meanwhile, readers of The Epoch Times said in a February poll that they consider Trump’s tariffs a key pillar of America’s economic revival, potentially strengthening the country’s economic position globally and safeguarding national interests.