March 6, 2026 - By Phillip L. Swagel, CBO's Director - This blog post provides information about how the recent Supreme Court ruling on tariffs affects the Congressional Budget Office's budget projections. In the wake of the ruling, the Administration terminated affected tariffs. We estimate that their termination results in projected deficits that are $2.0 trillion larger over the 2026–2036 period (fiscal years) than they were in our baseline projections last month. That includes $1.6 trillion in larger primary deficits and $0.4 trillion in debt-service costs.

CBO has regularly updated Congress about how changes in tariff policy affects projected revenues. In a November blog post and in The Budget and Economic Outlook: 2026 to 2036, we discussed the effects of trade policies in place as of November 2025. On February 20, 2026, the Supreme Court ruled that the Administration could not impose tariffs under the authority of the International Emergency Economic Powers Act (IEEPA). The Administration terminated those tariffs shortly after. (Other tariffs imposed last year, such as the product-specific tariffs implemented under section 232 of the Trade Expansion Act of 1962, remain in effect.) Revenue collected under IEEPA authority accounted for roughly 50 percent of the approximately $300 billion in total customs duties collected between January 2025 and February 20, 2026.

As a result of that ruling, we estimate the following:

• The effective tariff rate (ETR) on imported goods is lower by 8 percentage points.
• Primary deficits, not accounting for changes to the economy, will be $1.6 trillion larger over the 2026–2036 period than they were in the projections we reported in February.
• Less tariff revenue means that the federal government needs to borrow more, so outlays for interest will be $0.4 trillion higher than previously projected. That results in an increase in total deficits of $2.0 trillion over the 2026–2036 period.

The estimates in this post do not reflect the tariffs imposed on February 24, 2026, under section 122 of the Trade Act of 1974. We will provide further updates that take those tariffs and future changes into account.

How the Termination of Tariffs Imposed Under IEEPA Authority Affects CBO's Budgetary and Economic Projections

We estimate that without the IEEPA tariffs, the ETR for goods imported into the United States is about 7 percent, which is about 8 percentage points lower than the rate we reported last month. That new rate is still higher than the roughly 2.5 percent ETR in 2024, by about 4.5 percentage points. (CBO calculated the ETR in 2024 by using "calculated duties" and "goods imports for consumption" produced by the Census Bureau. Calculated duties may not reflect the exact value of the duties paid. The change in the ETR is calculated by applying new tariff rates to actual imports for consumption in 2024). Notably, the updated ETR does not account for additional changes to tariff rates after the termination of the IEEPA tariffs.

Not accounting for effects on the economy, the reduction in tariff rates that took effect on February 24, 2026, increases primary deficits by an estimated $1.6 trillion over the 2026–2036 period. The additional debt-service cost increases deficits by an additional $0.4 trillion over that same period. Total deficits are $2.0 trillion larger over the 2026–2036 period than they were in our baseline projections last month.

We estimate that about $150 billion in customs duties were collected as a result of the IEEPA tariffs before they were removed. Some importers have made claims for refunds of those duties as well as for interest. The extent and timing of payments to those importers are uncertain. Because of that uncertainty, the estimated change in deficits reported above does not reflect refunds of previously collected duties.

In our estimation, the termination of the IEEPA tariffs will have economic effects as well. In the most recent Outlook, we projected that changes in trade policy since January 2025 would temporarily raise the rate of inflation, reduce real investment, lower the level of real gross domestic product (GDP), and reduce employment. The termination of IEEPA tariffs dampens those effects. (That assessment does not take into account other changes made to tariff policy in the wake of the decision.)

Sources of Uncertainty

Our tariff projections continue to be uncertain, in part because the Administration may change how tariff policies are administered. For example, if mechanisms for additional exemptions were implemented, the tariff duties collected could decline substantially.

Moreover, the United States has not implemented changes in tariffs of this size in many decades, so there is little empirical evidence to guide our estimates of their long-term effects. Consumers and businesses could be more or less responsive to changes in tariffs of this size, which would cause trade and revenues to diverge from projected amounts.

CBO will continue to assess how businesses and consumers respond to the tariff changes and will incorporate that information, as well as any changes in tariff policy, in future analyses.

Source: CBO