When the Supreme Court ruled late last month that the majority of tariffs implemented by the second Trump administration in 2025 were illegal, it left something of a hole in the Treasury’s coffers.
The White House had been relying on the circa $300 billion-a-year in revenues to help fund a raft of policies, from tariff rebate checks to corporate tax writeoffs in the One Big Beautiful Bill Act.
But the court ruling threw a wrench into the works: The justices ruled the administration could not impose tariffs under the authority of the International Emergency Economic Powers Act (IEEPA), and the raft of duties imposed on ‘Liberation Day’ and earlier in 2025, were scrapped.
Trump and his team quickly rallied and imposed an all-out 10% duty on global trading partners, and while details remain sparse, authorities still believe the Treasury’s bottom line has taken a hit.
In a report released yesterday afternoon, the Congressional Budget Office (CBO) set about calculating the loss to the Treasury resulting from the IEEPA ruling. CBO director Phill Swagel reported primary deficits—not accounting for changes in the economy—will be $1.6 trillion larger over the next decade compared to projections prior to the ruling.
And of course, a fall in income means a renewed reliance on borrowing: The CBO estimates outlays for interest will be $400 billion higher between 2026 and 2036, compared to previous projections, which already accounted for net interest costs hitting more than $2.1 trillion a year by 2036.
In total, deficits post-ruling are $2 trillion larger over the 2026 to 2036 period than they were before the Supreme Court decision.
There are some upsides, Swagel notes: “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.”
The 15% conundrum
However, the CBO said that these estimations sat outside of the announcement that the President subsequently made about global tariff levels.
According to a presidential proclamation on February 20, a 10% surcharge was added on articles imported into the U.S., effective February 24, for a period of 150 days, under section 122 of the Trade Act of 1974 . President Trump later posted on social media that this would, in fact, be 15%—though no official legislation has been tabled.
As such, the Committee for a Responsible Federal Budget (CFRFB) calculated that the 10% tariff would generate $35 billion over the 150 days it is allowed to remain in effect, rising to approximately $50 billion if the 15% tariff is implemented. If the legislation is extended by Congress or reflected through other channels, the committee wrote tariffs would generate over $900 billion between 2026 and 2036 at a 10% rate, or $1.3 trillion at 15%.
Still, both of these tracks leave a gap in the CBO’s prediction that IEEPA losses will knock $2 trillion off the Treasury’s income.
Treasury Secretary Scott Bessent has already attempted to smooth the narrative over lost revenue. New tariffs under Section 122, combined with permanent tariffs potentially under Section 232 (national security justification), and Section 301 (unfair trade practises), will “result in virtually unchanged tariff revenue in 2026,” he told the Economic Club of Dallas on February 20.
