CBO Projects $2.1 Trillion Deficit After Supreme Court Tariff Ruling

The Congressional Budget Office projects the fiscal 2026 federal deficit will reach $2.1 trillion, an increase from the $1.9 trillion forecast issued in February. This widening gap is primarily driven by a $200 billion revenue shortfall after the Supreme Court of the United States ruled on February 20 that Donald Trump lacked the authority to impose tariffs under the International Emergency Economic Powers Act.

The ruling triggered approximately $100 billion in tariff refunds. In July 2026 alone, the government issued $36 billion in refunds while collecting only $26 billion. To recoup lost revenue, the administration transitioned its tariff strategy to Section 122 of the Trade Act of 1974 and later to Section 301. Although stronger income and payroll tax collections provided a $75 billion cushion, the deficit remained under pressure from rising costs for Social Security, Medicare, Medicaid, and net interest on public debt.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, criticized the current trajectory of federal borrowing. She noted that the government is on track to surpass $2 trillion in borrowing this fiscal year despite the absence of a recession, describing the situation as not normal.