• CBO estimates Trump's tariffs will cut deficits by $2.8 trillion over ten years.
• Tariffs are expected to shrink the economy and increase inflation rates.
• Inflation is projected to rise by 0.4 percentage points in 2025 and 2026.
• Tariff impacts are subject to significant uncertainty and ongoing legal challenges.
• Consumer purchasing power is expected to decrease due to higher prices.

The nonpartisan Congressional Budget Office (CBO) has released a comprehensive analysis indicating that President Trump's tariffs could reduce the federal deficit by $2.8 trillion over the next decade while simultaneously shrinking the U.S. economy and raising inflation rates. According to the CBO, these tariffs include a range of taxes imposed on imported goods, with predictions suggesting a decrease in economic growth of 0.06% each year as a result of these policies, which were enacted between January and May of this year, largely through executive action. Importantly, the analysis also notes that tariff revenues would primarily come from American consumers paying higher prices for imports, thereby impacting purchasing power adversely, according to ABC News, CBS News, and NPR.

The CBO's report anticipates that consumer inflation will rise by an average of 0.4 percentage points in 2025 and 2026, driven largely by increased costs for goods and capital. This will likely diminish overall household purchasing power, impacting both low-income and high-income households. The analysis notes that "households would ultimately buy less from the countries hit with added tariffs," emphasizing the far-reaching economic implications of these policies, as detailed in the analyses from multiple sources including ABC News, CBS News, and NPR.

The CBO analysis includes significant caveats, highlighting the uncertainty surrounding the administration's future tariff policies, as well as potential legal challenges against the tariffs that have temporarily been halted by court rulings. Phillip Swagel, CBO Director, noted that "because the United States has implemented no increases in tariffs of this size in many decades, there is little relevant empirical evidence on their effects." He underlined the unpredictable nature of the economic impacts, dependent on whether these tariffs remain in place permanently or if further changes occur, as mentioned by ABC News, CBS News, and NPR.