US fiscal strain: Deficit jumps to $284 billion despite record tariffs; shutdown delays and debt costs deepen gap

The United States began the 2026 fiscal year with a $284 billion federal deficit in October, a figure shaped by record tariff revenue but also distorted by a major shift in benefit payments and delays caused by a 43-day federal shutdown.

The Treasury said the shutdown postponed some agency spending, including pay for federal employees, though the impact on total outlays was estimated at under 5%.The deficit was 10% higher than the $257 billion shortfall recorded a year earlier, largely because roughly $105 billion in November benefits for certain military and healthcare programmes were pulled into October, as per Reuters. Without that shift, the monthly deficit would have been about $180 billion — a 29% drop from an adjusted October 2024 figure of $252 billion. Total outlays reached $689 billion — up 18% from last year — boosted by the reclassified benefit payments, reported Reuters. Some departments, however, showed lower spending, reflecting the delay in passing annual appropriations until 12 November, as per Bloomberg. Meanwhile, interest costs on federal debt climbed to $104 billion, a 27% increase from a year earlier, due to a higher debt load and a 3.36% average rate.

October receipts hit a record $404 billion, up 24% from last year, supported by customs duties, as per Reuters. Tariff revenues surged to an unprecedented $31.4 billion after new import duties imposed by President Donald Trump since returning to office, eclipsing September’s previous record. Customs duties had averaged about $29 billion over the prior three months. Trump said tariff collections would “skyrocket” as firms depleted pre-tariff inventories. In a message targeting the Supreme Court, which has questioned the legality of some emergency-based tariffs, he wrote, “I look so much forward to the United States Supreme Court’s decision… so that we can continue… to MAKE AMERICA GREAT AGAIN!”However, the Congressional Budget Office recently cut its estimate of how much Trump’s tariffs would reduce deficits over the next decade, lowering the projection from $4 trillion to $3 trillion due to tariff rollbacks from recent trade deals.Other revenue gains came from an $80 billion surge in non-withheld individual tax payments, up 75% from last year, mainly because California wildfire victims were allowed to delay filing until 15 October. Withheld taxes rose 6% to $279 billion, but corporate tax receipts were flat at $18 billion, which the Treasury attributed to tax breaks in a Republican-backed bill enacted this year.According to Bloomberg, treasury secretary Scott Bessent expects tariff revenue to accelerate and has suggested collections could reach $500 billion annually, though the pending Supreme Court case and Trump’s proposal to pay tariff “dividends” to citizens could complicate borrowing needs.Non-discretionary spending — including Social Security, healthcare and interest — continued to push deficits upward. Record tariff income last year offset only part of the 2025 deficit, which totalled $1.78 trillion, as per Bloomberg. Bessent has highlighted the drop in the deficit-to-GDP ratio from 6.4% to 5.9% as evidence of progress, saying he aims to bring it “to something with a three in front of it” by the end of Trump’s term.