GOP tax law fuels steeper deficits partly buffered by Trump’s tariff revenue

President Donald Trump’s tariffs are projected to help constrain federal deficits - to about 8 percent growth in 2026 - despite the massive cost of Republicans’ tax and spending law, according to new estimates by the nonpartisan Congressional Budget Office.

The One Big Beautiful Bill extended and expanded sweeping income tax cuts, increased the standard deduction, implemented new tax cuts for businesses, and poured more money into defense and immigration enforcement.

That law is expected to increase federal deficits by $4.7 trillion over the next 10 years, the CBO reported in its annual budget projection released Wednesday, including interest costs and impacts on the economy. The Trump administration’s mass deportation efforts have also increased projected deficits slightly by $0.5 trillion because immigrants leaving the country reduces the labor force.

But those costs have been largely offset by Trump’s tariffs on imports from other countries, which reduced projected deficits by $3 trillion, including their effects on the economy. It’s unclear how much longer the tariff revenue will continue to flow, because the Supreme Court is considering a request that could block many of the tariffs.

The estimated deficit for 2026 is 8 percent greater than it was in the last annual projection, released in January 2025, according to CBO. The cumulative deficit over the next 10 years is expected to be 6 percent greater than last year’s estimates, though the report assumes policy will remain unchanged.

Real GDP is expected to grow in 2026 as the Republican tax law’s provisions begin to outweigh drag from higher tariffs and lowered immigration and as AI increases productivity, CBO reported, though growth probably will slow in 2027.