The Congressional Budget Office (CBO) released a comprehensive report analyzing the fiscal impact of the Trump administration’s extensive global tariff strategy. The findings indicate a potential $2.8 trillion reduction in the federal deficit over the next decade. However, this fiscal improvement is accompanied by adverse economic consequences, including a deceleration in economic growth and heightened inflationary pressures, which collectively erode the purchasing power of American households.
The report, addressed to Democratic congressional leaders, highlights the anticipated behavioral shift of U.S. consumers reducing imports from tariff-affected countries. It forecasts a 0.4 percentage point increase in annual inflation between 2025 and 2026 due to these tariffs. The analysis presumes the sustained enforcement of tariff policies enacted via executive orders earlier in the year, despite ongoing legal challenges questioning the administration’s authority to impose such measures.
Consistent with other economic forecasts, the CBO warns that the deficit savings come at the expense of a 0.06 percentage point permanent decline in real GDP growth. Contrastingly, the Wharton School’s budget model projects even steeper economic contractions and wage declines. The CBO underscores significant uncertainty in its projections, acknowledging that future tariff adjustments could materially alter outcomes.