Budgetary and Economic Effects of Increases in Tariffs Implemented Between January 6 and May 13, 2025

This letter responds to a request for the Congressional Budget Office to estimate the budgetary and economic effects of increases in tariffs implemented through executive action between January 6 and May 13, 2025. The following estimates for the 2025–2035 period reflect the effects relative to the budget and economic projections that CBO published on January 17, 2025, which incorporated tariff rates in place on January 6, 2025.

• Before accounting for how the changes in tariffs would affect the size of the economy, CBO estimates that the increase in collections of tariffs would reduce primary deficits by $2.5 trillion. That estimate accounts for how flows of U.S. imports and exports would adjust in response to the tariffs imposed as of May 13, 2025.
• By lowering federal borrowing, those tariff collections would reduce federal outlays for interest by $0.5 trillion. As a result, in the absence of any effects on the U.S. economy, the changes in tariffs would reduce total deficits by $3.0 trillion altogether.
• In CBO’s assessment, the changes in tariffs will reduce the size of the U.S. economy—in part because of tariffs imposed by other countries in response to the increases in U.S. tariffs. After accounting for that change in the size of the economy, CBO estimates that the changes in tariffs will reduce total federal deficits by $2.8 trillion.
• Reductions in investment and productivity stemming from higher tariffs will be partially offset by increases in resources available for private investment resulting from the reduction in federal borrowing. CBO estimates that, on net, real (inflation-adjusted) economic output in the United States will fall as a result.
• Inflation will increase by an annual average of 0.4 percentage points in 2025 and 2026, in CBO’s estimation, reducing the purchasing power of households and businesses.

CBO completed this analysis before courts issued decisions on May 28 and 29 related to certain tariffs in place as of May 13. As of June 4, the executive orders imposing the tariffs described in this letter remain in place pending consideration by the Federal Circuit Court of Appeals.