Trump’s Tariffs: Cutting the Deficit, But Pain for Consumers, Says CBO

WASHINGTON — A new analysis from the Congressional Budget Office (CBO) reveals that President Donald Trump’s tariffs could reduce the federal deficit over the next decade, yet they are likely to contract the U.S. economy and lead to higher consumer prices.

According to the nonpartisan CBO, the tariffs are projected to shrink the nation’s primary deficit by approximately $2.5 trillion by 2035. This estimate also includes an additional savings of $500 million by curbing future interest payments on U.S. debt.

However, the analysis indicates that these tariffs may dampen economic growth. The CBO predicts that the U.S. gross domestic product (GDP) will decline by an average of 0.6% annually through 2035, largely due to altered behavior in the private sector. Businesses may hesitate to invest and expand in light of rising operational costs.

Consumers can expect increased costs for various goods. The CBO forecasts that the price index for personal consumption will be 0.9% higher by the end of 2026. Lower-income households, which spend a greater proportion of their incomes on essentials, may feel the pinch, but the most significant price hikes are anticipated for items like home appliances and vehicles, typically purchased by higher earners.

The eight-page report only reflects the impact of tariffs effective as of May 13. These tariffs include a baseline 10% on most imports, a 30% tax on goods from China and Hong Kong, 25% on many foreign vehicles and auto parts, and 25% on steel and aluminum imports, among others.

The CBO issued this report in response to inquiries from U.S. Senate Democrats regarding the financial implications of the administration’s import taxes. Notably, the analysis does not account for any tariff adjustments following May 13, including a recent doubling of import taxes on steel and aluminum, nor the potential implications from an ongoing trade court case that may challenge the legality of these tariffs.