Tariffs will lower deficits by $4 trillion over a decade, CBO says
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President Trump in the Oval Office. Photo: Andrew Harnik/Getty Images
The Trump administration's tariffs will lower deficits by a combined $4 trillion over the next decade, the Congressional Budget Office said Friday, a substantial increase from its last projection in June.
Why it matters: Tariffs are quickly becoming a part of the country's economic reality, making them harder to get rid of by the day.
By the numbers: CBO director Phillip Swagel, in a blog post, said tariff revenue would reduce primary deficits by $3.3 trillion, and cut the need for interest payments on borrowings by $700 billion, for a total $4 trillion reduction through 2035.
- In June, the CBO projected a total reduction of $3 trillion over the next 10 years; the scope and scale of tariffs have only increased since then.
The big picture: Tariffs have generated so much revenue, so quickly, that even skeptics concede it may now be hard to move away from them without finding another source of income.
- "Although there are many legitimate concerns over the tariffs – including their impact on the economy and the level of uncertainty they are creating – policymakers should not repeal them without an adequate replacement for the revenue loss," the Committee for a Responsible Federal Budget wrote earlier this month.
Yes, but: Despite the revised forecast, the CBO didn't project entirely positive effects from the trade war.
- "We estimate that the changes in tariffs, both by the United States and its trading partners, will reduce the size of the U.S. economy," Swagel wrote.
- "That reduction in output reflects both negative and positive effects: the negative effects of higher tariffs through channels such as reduced investment and productivity, and the positive effects of additional revenues from tariffs on U.S. imports, which would reduce federal borrowing and increase the funds available for private investment."
