The Congressional Budget Office (CBO) predicts that President Donald Trump’s extensive tariff plan will decrease the federal deficit by $2.8 trillion during the next decade yet this reduction will come at the expense of economic slowdown and reduced household buying power. The agency revealed its findings about the economic dangers of administration protectionist trade policies through a letter to Democratic leaders.
The CBO predicts that the tariffs will cause inflation to rise by 0.4 percentage points during 2025 and 2026 which will decrease consumer purchasing power. The analysis predicts permanent tariff retention despite a federal appeals court decision to let the Trump administration collect tariffs during ongoing legal proceedings.
The report confirms previous economic projections which show that the tariffs would decrease the deficit but simultaneously slow down economic growth by 0.06 percentage points per year. The U.S. economy faces rising prices for imported goods and raw materials because the Trump administration implemented executive orders that established broad import tariffs against major trading partners.
The CBO’s research supports business and economic concerns about how tariffs will negatively affect households through increased prices for their essential goods and vehicles. The CBO contradicts Trump’s claim that tariffs will enhance domestic manufacturing and decrease the U.S. trade deficit by warning that they will instead create substantial financial strain on households and reduce economic growth.
