U.S. Federal Budget Deficit Widens by $109 Billion Despite Increased Tariff Revenue

The U.S. federal budget deficit has reached $1.6 trillion in the first 10 months of fiscal year 2025, widening by $109 billion from the same period last year. Despite a significant increase in tariff revenue, the federal government’s spending has outpaced its revenue growth, according to the latest Congressional Budget Office (CBO) report released on Friday.

Tax Receipts Rise, but Spending Surpasses Growth

Federal tax receipts grew by $263 billion (a 6% increase) in the first 10 months of FY2025, largely driven by the Trump administration’s tariffs on imports. However, federal spending outpaced this increase, rising by $372 billion (or 7%), pushing the deficit higher than last year.

Customs Duties Surge Thanks to Higher Tariffs

A major factor contributing to the rise in federal revenue is the sharp increase in customs duties. So far in FY2025, customs duties have climbed by $70 billion (a 112% increase) compared to last year, due to heightened tariffs imposed on U.S. trading partners.

The Impact on Other Tax Revenues

• Individual income and payroll tax receipts increased by $214 billion (a 6% rise).
• Corporate income tax receipts, however, dropped by $27 billion (a 7% decrease), highlighting struggles within corporate taxation.

Higher Spending on Social Security, Medicare, and Medicaid

Much of the increase in federal spending can be attributed to rising outlays for mandatory programs:

• Social Security benefits grew by $102 billion (an 8% rise) due to an annual cost-of-living adjustment (COLA) and an increasing number of beneficiaries.
• Medicare spending increased by $58 billion, driven by higher enrollment and increased service payment rates.
• Medicaid costs rose by $47 billion due to rising per-enrollee expenses.

Debt Servicing Costs Soar

The cost of servicing the U.S.’s national debt, which has ballooned to nearly $37 trillion, has also surged by $60 billion (an 8% increase) in the first 10 months of FY2025.

The July Deficit

For the month of July, the deficit stood at $289 billion, marking an increase of $45 billion compared to July 2024. This is primarily due to a larger rise in spending than in tax collections. However, the government saw a $27 billion surplus in June 2025, a slight improvement over previous estimates.

The widening budget deficit and rising national debt continue to be major topics of concern among economists, with experts like Ray Dalio warning of a potential fiscal crisis if deficit spending remains unchecked. The situation underscores the mounting fiscal pressures facing the U.S. as it navigates economic uncertainties and the growing cost of servicing its debt. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.