Tariffs and Deficits: A Fiscal Dance in August

In August, the U.S. budget deficit saw a decrease of $35 billion, largely influenced by President Trump's tariffs, which boosted customs receipts by $22.5 billion. Despite this monthly decline, the year-to-date deficit rose by $76 billion, reaching $1.973 trillion with just a month remaining in the 2025 fiscal year.

A U.S. Treasury official refrained from predicting if the deficit would exceed the $2 trillion mark by the fiscal year's close on September 30, noting that September generally yields higher revenues due to quarterly tax deadlines. The ongoing tariffs have been pivotal, setting a new August customs revenue record of $29.5 billion.

The fiscal-year-to-date deficit is the third largest in history, following the COVID-19 era deficits of 2020 and 2021, which were fueled by reduced receipts and heavy pandemic relief spending. Total receipts for the first 11 months increased by $300 billion, reaching $4.691 trillion, while outlays grew by $376 billion to $6.664 trillion.