U.S. Budget Deficit Shrinks by 17% in the First Four Months of Fiscal Year 2026, Tariff Revenue Soars

Tariff revenue helped the United States reduce its budget deficit by 17% in the first four months of this fiscal year, highlighting the stakes for the U.S. government as the Supreme Court reviews whether President Trump has the authority to impose most tariffs.

In the four months ending in January, the budget deficit decreased from $840 billion in the same period last year to $697 billion, a 17% decline. Excluding calendar differences, the deficit since the start of fiscal year 2026 has fallen by 21%. Revenue growth outpaced spending. During this period, fiscal revenue increased by 12%, while spending grew by only 2%. From October to January, tariff revenue totaled $124 billion, a roughly 304% increase compared to the same period in 2025.

Earlier Wednesday, the Congressional Budget Office (CBO) estimated that if the tariffs enacted by November 20 remain in effect over the next decade, tariff revenue would reduce the federal deficit by $3 trillion over ten years.

However, this is not enough to offset other factors in Trump’s economic plan that have contributed to higher deficits. After incorporating the tax cuts from last July’s Republican landmark legislation and other new assumptions, the CBO raised its cumulative deficit forecast for the next decade by $1.4 trillion.

Since last year, Trump’s tariff measures have faced legal and legislative challenges. The Supreme Court is currently reviewing a case that could overturn many of these measures if it determines Trump lacked the authority to impose the tariffs under his emergency economic powers. The Trump administration has stated that if it loses, it will implement some tariffs through alternative, potentially more cumbersome methods.

Meanwhile, the latest budget data show that after last year’s tax legislation lowered corporate tax burdens, total corporate tax revenue has declined. Over the past four months, corporate tax revenue was $125 billion, down from $146 billion in the same period last year.

Risk Warning and Disclaimer

The market carries risks; investments should be made cautiously. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investment is at your own risk.