US Budget Swings to $120 Billion Deficit After Tariff Repayments
Synopsis
Refunds of tariffs ruled illegal contributed to a sharp deterioration in the federal budget balance during June.
Key Highlights
- The US Budget deficit June increased to $120 billion.
- Tariff refunds of 49.2 billion, were greater than customs duties collected at $23.6 billion.
- Refunds spiked following the US Supreme Court rules President Donald Trump’s IEEPA tariffs.
The U.S. Treasury Department reported that in June 2026 the federal budget ran a $120 billion deficit, as opposed to of $27 billion surplus recorded in June 2025, as growing refunds linked to President Donald Trump’s tariffs weighed on government finances.
Gross customs duty collections amounted to $23.6 billion while the tariff refunds stood at $49.2 billion, creating a net outflow of $25.6 billion for the month, Treasury reported.
The reimbursements started in May, when the high U.S. Court ruled that Trump’s broadest tariffs implemented under the International Emergency Economic Powers Act (IEEPA) were unlawful. Refunds from June were nearly double the $22 billion, refunded in May.
A bigger US budget deficit could also alter ratings on expectations around US interest rates and the US dollar, triggering flow-on effects for Australian producers and financial markets, with implications for local businesses and investors.
Revenue Falls as Refunds Rise
Over $31 billion, or 6% less receipts were recorded in June compared to its level of June 2025, caused by the increase in refunds on tariff bills.
Government outlays rose $616 billion, up $117 billion, or 23%, from the same month in 2022. The unadjusted June shortfall of $120 billion was a seasonally-adjusted 79% wider than the previous year’s adjusted deficit of $67 billion.
Gross public interest payments totaled 28% to $185 billion, which was partially offset by a 17% increase in interest received by federal trust funds to $70 billion.
Record $1.367 Trillion Deficit In Our Fiscal Year
US budget deficit rose to $5.39 billion in Feb, 2% rise of $1.367 trillion for first nine months of fiscal 2026. For the period, receipts jumped 4% to $4.151 trillion while outlays went up by 3% to $5.518 trillion.
Customs receipts during the fiscal year-to-date (after refunds) amounted to $163 billion compared with $108 billion for this period last year in fiscal 2025.
Trump’s tariff policy is still being scrutinized, with a temporary 10% global tariff due on July 24, while the government crafting new duties aimed at fighting anti-forced labour enforcement and what it calls excess industrial capacity.
Source: Reuters
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