Trump’s Recent Tariff Rollbacks Erase Nearly $800 Billion In Expected Debt Reduction: CBO

The Congressional Budget Office (CBO) has released new projections indicating that the recent rollbacks of President Donald Trump‘s aggressive tariff strategy have nullified an anticipated $800 billion reduction in debt over the next decade.

Lower Tariffs, Lower Fiscal Gains

The CBO’s updated baseline budget projections show that the expected impact of the tariff policy on U.S. deficits has significantly decreased since the last projections in August.

Previously, a 20.5% effective tariff rate was expected to shrink future deficits by $3.3 trillion through 2035, along with $700 billion in interest savings. But changes to the tariff structure have altered that outlook. The CBO now projects that the fiscal gains have been significantly reduced, with a 16.5% effective rate yielding only a $2.5 trillion deficit reduction and $500 billion in interest savings.

The CBO emphasized that the projected debt savings depend largely on future tariff decisions, a domain fraught with political volatility and legal troubles.

Multiple Tariff Reductions Announced

Trump has been actively rolling back tariffs in recent months. In a move to address soaring grocery prices, the President eliminated tariffs on certain Brazilian exports on Thursday.

This followed an earlier executive order that lowered tariffs on beef, coffee, bananas, and tomatoes, among other agricultural imports, in response to rising prices.

Earlier this month, Trump signed an executive order reducing a fentanyl-related tariff on Chinese imports from 20% to 10%, fulfilling a key commitment from his trade agreement with President Xi Jinping.

The Tough Balancing Act

The CBO’s latest projections come at a time when economists are already warning of the dangers posed by the U.S. national debt, with the debt now standing at $38 trillion, a figure that some have labeled a “national security crisis.”

At the same time, talk of a looming affordability crisis is gaining steam. Nobel laureate Paul Krugman says Trump’s policies are driving up living costs, arguing that tariffs are pushing inflation higher and strict immigration measures are contributing to rising grocery prices.

Notably, Trump has resumed focus on affordability after the sweeping win of Democrats earlier this month, whose election campaign on rising prices struck a chord with the voters.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.