CBO highlights the good news amid Trump’s lost tariff revenue raising the deficit by $2 trillion: lower inflation and unemployment—and higher GDP

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The Supreme Court’s ruling invalidating most of President Donald Trump’s tariffs has offered a silver lining for an administration determined to use tariff proceeds to strengthen the U.S. economy. Although the estimated $300 billion in annual tariff revenue is gone, reduced tariffs provide U.S. consumers and businesses with some relief from easing pricing and labor pressures.

A Congressional Budget Office (CBO) published on Thursday estimated the end of tariffs under the International Emergency Economic Powers Act (IEEPA) would widen the U.S. deficit from 2026 to 2036 compared to baseline projections from when the tariffs were in effect last year. That total includes $1.6 trillion in primary deficits and $400 billion in interest costs.

Losing the IEEPA tariffs is a major setback for the administration’s hopes of using tariff revenue not just to pay down the nearly $39 trillion national debt, but also to and .

However, CBO Director Phillip Swagel noted lower tariffs would ease the burden on U.S. companies and consumers battered by nearly a year of higher import taxes, creating more opportunities for U.S. GDP growth.

“In the most recent Outlook, we projected that changes in trade policy since January 2025 would temporarily raise the rate of inflation, reduce real investment, lower the level of real gross domestic product (GDP), and reduce employment,” Swagel said in the report. “The termination of IEEPA tariffs dampens those effects.”

Extensive research has shown tariff revenue comes not from exporters but from U.S. importers—and indirectly, . The Federal Reserve Bank of New York found . Meanwhile, efforts to narrow the trade deficit—which Trump cited as the driver of his tariff policy—had only limited results. Despite about 10 months of steep tariffs, the gap between U.S. exports and imports of goods and services shrank to $901 billion in February, according to . In 2024, the deficit was $904 billion.

Tariffs’ economic impact so far

After nearly a year of IEEPA tariffs, U.S. companies and consumers have felt the strain of the levies on their margins and wallets, respectively. Pantheon Macroeconomics analysts told clients in September, citing data from the , tariffs were as firms delayed raises and hiring to protect margins threatened by higher import costs. Jobs data from the past year shows a , which labor economists have partly attributed to tariffs —the opposite of the tariffs’ intended goal to boost reshoring.

“It is striking how soft manufacturing has been because in theory, you put tariffs in place to protect domestic manufacturing, so that domestic manufacturing employment grows,” Laura Ullrich, director of economic research at the Indeed Hiring Lab, . “And we have seen the opposite of that.”

Companies trying to ease tariff-related pain have instead passed the burden to consumers, who were projected to due to IEEPA tariffs—which (referring to goods excluding volatile food and energy components) by 2% through 2025, according to Yale Budget Lab data.

Already visible tariff relief

Following the Supreme Court’s IEEPA tariff ruling, economists have already noted how reversing these tariffs will ease inflation. Updated Yale Budget Lab data shows a more moderate from tariffs, including the under Section 122 of the 1974 Trade Act that Trump announced after the Supreme Court decision. 

Goldman Sachs economists Alec Phillips, Elsie Peng, and David Mericle wrote in a client note last month over 10 months and has likely peaked, with tariffs expected to add just 0.1% to inflation in 2026.

That said, consumers might not see tangible relief right away. The $175 billion in IEEPA tariff revenue is held in the Treasury and, per federal rules, is , according to a published Monday by the Cato Institute. A Cato Institute economist calculated interest would amount to roughly $700 million monthly across nearly 130 million taxpaying households. Moreover, U.S. firms are unlikely to cut prices as quickly as they raised them over the past year. 

“We would not expect companies to lower prices in response to tariff reductions nearly as quickly as they increased them in response to tariff increases,” the Goldman Sachs analysts said.