Shipping containers at PortMiami. (Eva Marie Uzcategui/Bloomberg)
Key Takeaways:
- The U.S. budget deficit fell to $1.67 trillion in the 2025 calendar year, the smallest in three years, driven largely by a surge in customs revenue.
- Tariff revenue totaled $264 billion, up $185 billion from a year earlier, but December corporate tax receipts fell 28% and individual refunds are starting.
- Future results face risk as the Supreme Court weighs tariff legality and analysts say student loan accounting masks a deficit above 6% of GDP.
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The U.S. budget deficit shrank to $1.67 trillion for the 2025 calendar year, the smallest in three years, thanks mainly to a record surge in customs revenue.
The deficit for the month of December was $145 billion, Treasury Department data showed on Jan. 13. For the first three months of the 2026 fiscal year, which began Oct. 1, the shortfall came in at $602 billion. Last month saw customs duties slow to $28 billion, the smallest haul since July.
While President Donald Trump’s tariff hikes on major trading partners have boosted revenue, his signature tax legislation is starting to have the opposite effect. December data showed a drop in corporate tax receipts to $65 billion, down 28% from the same month a year before. A wave of individual tax refunds is also poised to kick in starting this month, as filing season begins.
For the 2025 calendar year, tariff revenue came in at $264 billion, up some $185 billion from the year before. The inflow from the duties may soon be affected by the Supreme Court, which is poised to rule on the legality of a swath of Trump’s levies.
Measures introduced in the One Big Beautiful Bill Act are projected to add $3.4 trillion to deficits over the 10 years through 2034, according to a July estimate from the nonpartisan Congressional Budget Office.
Treasury Secretary Scott Bessent has hailed the narrowing in the fiscal deficit as showcasing the success of Trump’s economic policies. For the 2025 fiscal year, which ended Sept. 30, the deficit-to-GDP ratio shrank to an estimated 5.9% from 6.3% the prior year.
But some budget analysts highlighted that the figures were affected by a change to how the impact of student loans are calculated, resulting in a distortion of the ratio. When accounting for the change, analysts at JPMorgan Chase & Co. calculated the actual deficit was more than $1.9 trillion, which meant it once again exceeded 6% of GDP.
