According to BlockBeats, the U.S. Congressional Budget Office (CBO) released an analysis indicating that U.S. President Donald Trump's extensive global tariff plan is projected to reduce the federal deficit by $2.8 trillion over the next decade. However, the report also warns of potential economic slowdown, increased inflation, and diminished purchasing power for American households.
The report, addressed to Democratic congressional leaders, outlines the impact of the administration's broad tariff impositions on multiple countries. It suggests that American households will likely decrease imports from tariff-affected nations, predicting a 0.4 percentage point increase in annual inflation rates between 2025 and 2026.
The analysis assumes the tariffs announced via executive orders from January to May will be implemented long-term. Although a federal court previously ruled that invoking emergency powers for tariff imposition was beyond authority, an appeals court has allowed the tariffs to remain during litigation.
The CBO's findings align with other economic models, indicating that the $2.8 trillion deficit reduction over ten years will come at the cost of reduced household wealth and overall economic contraction. The report estimates a permanent 0.06 percentage point decrease in the annual growth rate of the U.S. real GDP. A prior report from the University of Pennsylvania's Wharton School budget model in April was more pessimistic, forecasting a potential 6% long-term GDP shrinkage and a 5% drop in wage levels.
The CBO emphasizes significant uncertainty in its calculations, partly due to the possibility of the Trump administration altering tariff policy execution at any time.