The Congressional Budget Office on Thursday slashed its revenue projections for Trump’s tariffs, reducing estimated savings from the tariffs by $1 trillion over 11 years.
In August, the CBO estimated that revenues from Trump’s tariff hikes would reduce federal budget deficits by $3.3 trillion from 2025 to 2035, with an additional savings of $700 billion generated by lower spending on a smaller pile of debt. Now, the CBO estimates that the direct budgetary savings will come to $2.5 trillion, with another $500 billion in savings on interest payments.
CBO Director Phillip Swagel said in a blog post that new data accounted for about two-thirds of the downward revisions in the projections. Among other things, Trump reduced tariffs on some imports from China, Japan and the European Union. In August, the CBO estimated that the average effective tariff rate on all imports was 20.5%. As of November, that estimate has been reduced to 16.5%.
Swagel noted that the CBO may have to revise its projections again, depending on how the tariffs are implemented and how legal challenges to Trump’s unilateral actions play out. In addition, Trump may change his policies once again, possibly by exempting more goods from his import taxes. “If mechanisms for additional exemptions were implemented, the tariff duties collected could decline substantially,” Swagel wrote.