Tariff Revenue Versus the Deficit
President Donald Trump has repeatedly presented tariffs as a way to bring in money for the federal government and to push companies to make more goods in the United States. The trade back-and-forth with Canada continued over the weekend, and the administration shows no sign of slowing down. Tariffs are indeed producing substantial federal revenue, but the latest budget figures show that the money collected remains far below the government's annual budget shortfall.[S1]
Data from the Treasury, assembled by the Joint Economic Committee, shows the federal government took in $154.47 billion in net customs duties over the first ten months of fiscal 2026. Meanwhile, the budget shortfall for that stretch hit $1.799 trillion, putting tariff receipts at about 9% of the deficit. The Congressional Budget Office now projects the full-year fiscal 2026 deficit near $2.1 trillion, roughly $200 billion above what it forecast in February, a change the agency links mainly to weaker-than-anticipated tariff revenue.[S1]
Who Actually Pays the Tariff
Many people assume a tariff is a charge billed to a foreign country. That is not how it works. The duty is paid by the American importer that brings the merchandise across the border. From there, the importer chooses whether to swallow the added expense or shift part or all of it forward along the supply chain, which can translate into steeper prices for companies or households.[S1]
Research from the Federal Reserve indicates that the 2025 tariffs did feed into what consumers pay. An August study by the Federal Reserve Bank of New York put the pass-through to consumer prices at roughly 26%, counting both the direct effect on imported products and the indirect effect on domestic goods made with imported components. Separate Fed analysis showed households exposed to tariffs cut back spending on the affected items, with lower-income families carrying a heavier welfare cost. Still, that does not mean shoppers shoulder every dollar; firms can trim margins, switch suppliers or rework operations, so the burden spreads in varied ways.[S1]
Can Tariffs Meaningfully Reduce the Deficit?
No, not by themselves. The approximately $154 billion in net customs duties gathered through July is a meaningful revenue stream, yet it pales next to a deficit that had already climbed close to $1.8 trillion by that point in the fiscal year. CBO's newest figures also illustrate why tariff income is hard to count on as a dependable funding source. The agency now sees fiscal 2026 customs revenue coming in about $250 billion below its February estimate, partly because tariffs levied under the International Emergency Economic Powers Act ended after a Supreme Court decision, and much of what was already collected under that authority is likely to be returned.[S1]
The picture is therefore more nuanced than a simple yes-or-no about whether tariffs raise money. They do bring in federal revenue, but not nearly enough on their own to erase the deficit, and part of the economic cost can land on American businesses and consumers through higher prices and lower spending. One more distinction matters: the deficit is the yearly gap between what the government spends and takes in, whereas the national debt is the total sum owed. That debt passed $40 trillion in August 2026.[S1]
