Trump’s Tariffs Would Cut Budget Deficits by $2.8 Trillion, CBO Says

In a separate analysis, the CBO recently estimated that extending the 2017 tax cuts, as proposed in the administration’s new tax and spending bill, would increase the deficit by roughly $2.4 trillion over the same period. That legislation would reduce federal revenues by $3.67 trillion while cutting spending by $1.25 trillion, resulting in a net increase in the federal deficit.

The CBO’s estimate of gains from tariffs strengthens the administration’s case that tariffs can pay for tax relief. In fact, the combination of tax relief and tariffs produces a net reduction in deficits, according to the CBO.

The tariff estimate covers measures implemented between January 6 and May 13, 2025. These include a 30 percent levy on imports from China and Hong Kong, 25 percent duties on autos, auto parts, steel, and aluminum, a 10 percent general tariff on most other imports, and the elimination of duty-free treatment for low-value Chinese shipments.

CBO estimates that, before accounting for economic side effects, the new tariffs will reduce primary deficits by $2.5 trillion and cut interest payments by another $500 billion, for a total deficit reduction of $3.0 trillion. After factoring in modest economic drag—slightly lower GDP and temporarily higher inflation—the net deficit reduction is pegged at $2.8 trillion.

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