The Congressional Budget Office now projects a $2.1 trillion federal deficit for fiscal 2026, $200 billion above its February forecast, driven largely by a tariff collapse after the Supreme Court struck down IEEPA-based duties. In July, Treasury refunded $33 billion in tariffs while collecting only $25 billion, and customs revenue overall is running about 60% below CBO's earlier projections.
Treasury Secretary Scott Bessent had pledged in February that replacement tariff authorities, including Section 122 and enhanced Section 232/301 duties, would keep revenue 'virtually unchanged'; instead CBO now expects about $250 billion less in tariff revenue than forecast, partially offset by higher income and payroll tax receipts. The deficit, at 6.6% of GDP, is more than double Bessent's stated 3% target, and the government is on pace to spend over $1 trillion servicing debt this year.
Tax Foundation economist Alex Durante noted both the Section 122 and Section 301 tariffs remain under legal challenge and may not survive court review, calling tariffs an unreliable revenue source. Neither Treasury nor the White House responded to questions about whether Bessent stands by his earlier prediction.
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