Tariff losses push 2026 U.S. deficit to $2.1 trillion, CBO reports

The Congressional Budget Office’s latest monthly review shows the federal deficit for fiscal 2026 climbing to $2.1 trillion, a rise from the $1.9 trillion forecast made before the Supreme Court invalidated President Trump’s signature tariff program. The agency attributes most of the increase to a $250 billion shortfall in tariff and customs-duty revenue, a 60 % plunge caused by the court’s February 20 ruling that the administration lacked authority under the International Emergency Economic Powers Act.

While stronger income and payroll-tax collections have added about $75 billion, other revenue streams remain $25 billion below projections, leaving a net $200 billion gap that spending cannot explain. Refunds on duties collected under the struck-down authority have already topped $100 billion, and in July the government refunded more than it collected. Officials note that borrowing has surged, with $1.8 trillion borrowed this fiscal year and $431 billion borrowed in July alone. The shortfall adds pressure to an already expanding deficit driven by higher entitlement outlays and rising net interest on the debt.