The Supreme Court’s decision earlier this year striking down President Trump’s first attempt at global tariffs will sock it to the U.S. Treasury, blowing a nearly trillion-dollar hole in the budget over the next decade, according to the Congressional Budget Office.
Invalidating the tariffs means the government will take in about $700 billion less in customs duties. That includes refunds on the $166 billion in tariffs already collected before the justices struck them down.
And since the government is already running deficits, the $700 billion will lead to an extra $200 billion in debt service, leaving a total hole of roughly $900 billion that wasn’t there when CBO did its last projection in February.
“Those increases are largely driven by the removal of tariffs imposed under the authority of the International Emergency Economic Powers Act (IEEPA) following the Supreme Court’s decision. The administration imposed new tariffs after the decision, but they are projected to raise less revenue,” CBO Director Phillip Swagel said in a new analysis published Thursday evening.
It was the latest in grim fiscal news.
A day earlier, the Treasury Department announced that the government had amassed more than $40 trillion in total debt.
It took just four years to amass the final $10 trillion, and it was just in 2017 that the U.S. crossed the $20 trillion mark.
CBO’s tariff news means the hole will grow faster than Congress’ official scorekeeper believed.
Mr. Trump last year slapped duties on most of the globe, citing the International Emergency Economic Powers Act as his authority.
The result was consumers paying higher prices for goods, but revenue from the tariffs paid on those goods flooding into the treasury.
Mr. Trump took to joking that his budget analysts were mystified by the improved revenue picture, until he told them to look at the line for customs duties.
The windfall ended in February, when the Supreme Court ruled 6-3 that Mr. Trump was misusing the law and Congress didn’t intend for him to be able to use it for tariffs.
Chief Justice John G. Roberts Jr., writing for the majority, said the court wasn’t dealing with the financial aspects but rather the law.
“We claim no special competence in matters of economics or foreign affairs. We claim only, as we must, the limited role assigned to us by Article III of the Constitution. Fulfilling that role, we hold that IEEPA does not authorize the president to impose tariffs,” he wrote.
The justices said Mr. Trump does have tariff powers under other parts of the law that he could tap.
And he has done so in the wake of the court decision, announcing a global 10% tariff under the Trade Act of 1974. That law has a time limit on the tariffs, and they expired on July 24.
Mr. Trump then slapped new tariffs of 10% to 12.5% on goods from more than 80 countries, again citing the Trade Act of 1974.
He also has new tariffs specifically imposed on Brazil, as well as higher tariff rates generally on steel, copper and aluminum products.
It’s not enough to make up for the loss of the original global tariffs.
This current fiscal year alone, the reversal will total a quarter-trillion dollars. That includes both lost revenue and the need to pay back tariffs previously collected.
