In a June 4 report to Congress, the Congressional Budget Office offered the following estimates of the budgetary and economic effects over the next ten years of increases in tariffs implemented through executive action between Jan. 6 and May 13, 2025. (This report was issued prior to court decisions striking down some of these tariffs, which nevertheless remain in effect at present, and the doubling of Section 232 tariffs on imports of steel and aluminum and derivative products.)
Budget deficit. Tariff collections will decrease primary U.S. budget deficits by $2.8 trillion. This estimate accounts for how flows of U.S. imports and exports would adjust in response to tariffs as well as an estimated reduction in the size of the U.S. economy attributable in part to the retaliatory tariffs imposed by other countries.
The CBO said this estimate reflects an assumption that tariffs will be collected on all affected imports, with no exemptions beyond those currently specified. However, there is also some uncertainty regarding potential changes to how tariff policies are administered as well as how businesses and consumers may respond to such changes.
GDP. By 2035 the level of real gross domestic product will be 0.6 percent lower than the CBO’s January 2025 forecast. This reduction reflects both the negative effects of higher tariffs and frequent tariff changes, including reduced investment and productivity, as well as the positive effects of additional revenues from tariffs, which would reduce federal borrowing and increase the funds available for private investment.
Inflation. Inflation will increase by an annual average of 0.4 percentage points in 2025 and 2026, but thereafter “the tariffs will not have additional significant effects on prices.”
Workers and consumers. Tariff increases will reduce average real income by decreasing aggregate output and raising prices for households in all income groups. Industries that produce goods that compete with imports will probably expand, whereas industries that chiefly produce exports or source a large share of their production inputs from abroad will probably contract. The tariffs will increase the prices of goods more than the prices of services, which will have a disproportionate impact on households at the lower end of the income distribution. However, the tariffs will also produce the largest price increases for durable goods such as household appliances and motor vehicles, which account for a larger share of total consumption for households at the higher end.
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