CBO: Trump Tariffs Pay for OBBB Deficits
As media were starting to get caught up in all the folderol of the Musk-Trump breakup, the Congressional Budget Office put out a report requested by key Senate Democrats that looks like something the president should be crowing about.
To wit: Trump’s tariffs will reduce total federal deficits by $2.8 trillion over the next 10 years, the CBO reported June 4 in Budgetary and Economic Effects of Increases in Tariffs Implemented Between January 6 and May 13, 2025 (interesting start-date, huh?).
Senate Minority Leader Chuck Schumer (D-NY), and Sens. Ron Wyden (D-OR), ranking member of the Finance Committee, and Jeff Merkley (D-OR), ranking member of the Budget Committee, requested the CBO report.
The CBO had previously reported that Trump’s Big Beautiful Bill passed by the House May 22 would add $2.4 trillion to the deficit over the same 10 years, to 2035.
Details of tariff deficit reduction are not pretty. CBO estimates the gross increase in tariff collections would cut primary deficits by $2.5 trillion over 10 years. Reduced federal borrowing would cut interest payments by $500 billion, CBO says, for a total deficit reduction of $3 trillion.
Higher tariffs will cut into the size of the US economy “in part because of tariffs imposed by other countries in response to the increase in US tariffs,” the CBO says. That’s how the CBO’s -$3 trillion cost for tariffs lands at a net result of -$2.8 trillion.
Republicans and Democrats alike who have basic math skills will glean a net reduction of $400 billion from the one-two punch of Trump tariffs and OBBB, which coincidentally equals the difference between the first Trump administration’s federal spending and the Biden administration’s lower federal spending.
NPR covered the CBO’s June 4 tariff report in last Friday’s Morning Edition broadcast, but there has been precious little reporting about it since. Where’s Trump in touting the CBO report showing the net benefit of tariffs to the federal deficit?
The net result is even more widening of the gap between rich and poor, though Trump, who openly admires the Gilded Age, does not have to bring that up.
Consider: This amounts to a $2.4-trillion increase in the federal deficit due largely to extension of a big tax cut that benefits mostly rich Americans vs. $2.8 trillion in deficit reductions from a tax increase that will chiefly hurt lower- and middle-class Americans.
Four of five independent organizations estimate American families will pay anywhere from $3,100 to $4,900 per year in tariffs – taxes – while the fifth estimates they will cost just $1,243 per year, according to PolitiFact. So that’s $31,000 to $49,000 – or maybe just $12,430 -- over that same 10-year period measured by the CBO.
Interviewed on NBC News’ Meet The Press in May, Trump’s first vice president, Mike Pence, called it “the largest peacetime tax hike on the American people in the history of this country.”
Those estimates cited by PolitiFact have been upended since April 2, as Trump continuously added new tariffs here and reduced other tariffs there. The top estimate came from The Budget Lab at Yale University, which apparently adjusted its number between $4,700 and $4,900 over the last couple of months. Either estimate when multiplied over 10 years is about the average price of a new car or truck in the US, pre-tariff, many of which are sold to upper-middle income consumers via seven-year loan.
On one hand, it makes sense that the Trump White House is not interested in talking about the results of the CBO estimate of deficit reduction from the president’s tariffs.
On the other hand, Trump knows well that most voters will pay attention only to the $2.8 trillion figure and not the details, and besides, he has never acknowledged his tariffs as taxes on American consumers.
Lassa is founding editor of The Hustings.