Impact of Trump's Tariffs on U.S. Economy

The Congressional Budget Office has reported that President Trump's tariffs on foreign goods will lead to reduced economic output in the U.S. and decrease federal budget deficits by $2.8 trillion over a decade. These tariffs also increase consumer prices and inflation, affecting household purchasing power.

The Congressional Budget Office (CBO) has shed light on the economic repercussions of President Donald Trump's tariffs imposed on foreign goods as of May 13. According to a new report, the U.S. economic output will decline, paired with a reduction in the federal budget deficit amounting to $2.8 trillion over ten years.

The CBO communicated these findings in a letter to Senate Democratic Leader Chuck Schumer and Senators Ron Wyden and Jeff Merkley. The agency stated that these tariffs, currently facing legal challenges, would elevate the costs of consumer and capital goods, leading to an anticipated drop in economic output.

Further, the letter explained that inflation is expected to rise by an average of 0.4 percentage points annually in 2025 and 2026, consequently diminishing the purchasing power of households and businesses. The analysis, reflective of an economic outlook issued in January, is part of a response requested by the Democratic senators regarding the impact of tariff policies under the Trump administration.

(With inputs from agencies.)