Trump’s tariffs spur government’s improving deficit

The deficit has ticked down in the new fiscal year, and analysts said there’s one obvious reason for the improvement: President Trump’s tariffs.

Two months into fiscal 2026, Uncle Sam’s spending is roughly static but revenue is up by 18%.

Some of the revenue is from payroll and individual income taxes, where payments are up and withholdings are down. The rest, analysts said, is customs duties. That includes tariff revenue, which is going gangbusters, running $50 billion ahead of last fiscal year at the same point.

All told, the government’s income was $112 billion higher over the past two months than it was at the same time in 2024. When adjusted for calendar issues, such as payments sped up or delayed because of weekends, income is running $115 billion ahead of the last fiscal year at this point.

“That increase was caused largely by changes in tariff rates that began in February 2025 and reflects the enactment in July of the 2025 reconciliation act,” the Congressional Budget Office said in its analysis of the data.

Overall, the government has collected $740 billion in revenue and spent nearly $1.2 trillion in the new fiscal year, which began Oct. 1. The resulting deficit is $458 billion.

The record-long government shutdown is still being felt in the numbers, Treasury officials said.

The Agriculture Department, for example, is running $11 billion behind expected spending at this point because of payments that were delayed by the shutdown, which ran from Oct. 1 to Nov. 12.

Mr. Trump has celebrated the income from the tariffs.

He tells a joke that budgeteers were miffed about where all the money was coming from until he told them to look at the tariff column.

He also has acknowledged some economic pain.

This week, the president proposed a $12 billion bailout for farmers whose products have suffered as other nations have slapped retaliatory duties on U.S. goods.

Democrats said he still doesn’t grasp the extent of the pain.

“What kind of world does he live in? Does he understand that these tariffs are raising prices through the roof?” said Senate Minority Leader Charles E. Schumer, New York Democrat.

He said Mr. Trump is suffering from an economic “delusion.”

The president has predicted that the tariffs will help American manufacturers, spurring new jobs in that sector. So far, however, those jobs have not materialized.

The Peterson Institute for International Economics said manufacturing job growth “has been particularly weak in 2025.”

The tariffs’ gains to Uncle Sam are still far below what is needed to close the deficit, which is expected to be at least $1 trillion per year in the immediate future and is projected to reach $2 trillion.

“This is simply unsustainable,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

She said the interest on the debt is crippling and Medicare and Social Security “are careening towards insolvency in just seven years, at which point benefits will be cut across the board regardless of age or need.”

“Policymakers should work together on an attainable fiscal goal that will put us on a path to long-term economic stability,” she said.

Medicare spending is up 14% so far this year, and Medicaid spending has risen 6%. The Congressional Budget Office said costs per enrollee are rising.

Social Security spending rose 7% because of the natural rise in beneficiaries, cost-of-living adjustments and a 2023 law that allows some public employees to collect Social Security along with pensions.

The Department of Homeland Security’s spending was lower this fiscal year than last year because the hurricane season wasn’t as rough.

The government ended fiscal 2025 with a $1.8 trillion deficit. It collected $5.2 trillion in revenue and spent $7 trillion.

Total federal debt, the accumulation of deficits, stood at $38.4 trillion as of Tuesday. Of that, $30.8 trillion is debt held by the public. The rest is internal government holdings, such as IOUs to trust funds.