US Budget Deficit Drops 15 Percent in First Quarter

The United States Department of the Treasury reported that the federal budget deficit narrowed by 15 percent during the first three months of fiscal 2026, falling to $602 billion from $711 billion during the same period in fiscal 2025. Overall revenue reached a record $1.2 trillion, bolstered by a surge in customs duties that rose from $23 billion to $94 billion due to wide-ranging tariffs implemented by President Donald Trump.

Despite the quarterly decrease, December alone saw a record $145 billion deficit, a 67 percent increase over December 2024. The Treasury attributed this spike to record outlays of $629 billion, which included $32 billion in benefit payments shifted from January. Adjusted for these calendar shifts, the December deficit would have been $112 billion, an 11 percent decrease from the previous year.

Total spending for the quarter hit a record $1.8 trillion. Key increases included a $48 billion rise in Treasury outlays for public debt interest and a $34 billion increase in Health and Human Services spending for Medicare and Medicaid. December military spending also rose 25 percent to $98 billion, following delays caused by an October government shutdown. While customs receipts reached $27.9 billion in December, revenue growth may have plateaued following November trade deals with China and South Korea. The legality of certain country-specific tariffs remains pending a Supreme Court of the United States ruling.