According to an analysis released Wednesday by the Congressional Budget Office (CBO), President Donald Trump’s sweeping tariff plan would cut U.S. deficits by $2.8 trillion over a 10-year period while shrinking the economy, raising the inflation rate and reducing the purchasing power of households overall, the Associated Press reports.
The numbers were revealed in a letter sent to Democratic congressional leadership outlining how the Trump administration’s plan to impose wide-ranging tariffs on countries around the world will affect American households.
Baked into the CBO analysis is a prediction that households would ultimately buy less from the countries hit with added tariffs. The budget office estimates that the tariffs would increase the average annual rate of inflation by 0.4 percentage points in 2025 and 2026.
Largely confirming what other economic models have predicted, the CBO’s estimates show that the tradeoff for a $2.8 trillion deficit reduction over 10 years would be an overall reduction in household wealth. In addition, the tariffs either would shrink the economy or reduce the rate of the gross domestic product by 0.06 percentage points per year.
A major caveat of the CBO’s estimates is written into the report — its estimates are “subject to significant uncertainty, in part because the Administration could change how the tariff policies are administered.”
