US Deficit Falls, Trade Deficit Shrinks on Tariffs

The U.S. federal budget deficit fell by 9% in May 2025 to $316 billion, primarily due to a record $23 billion in customs receipts generated by President Trump's new import tariffs. This contributed to a 15% year-over-year increase in total government receipts, while outlays also rose. Adjusting for calendar shifts, the deficit decline was an even steeper 17%. Interest payments on the national debt dropped 10% to $92 billion, marking the first annual decrease since October. However, the durability of the increased tariff revenues is uncertain as the administration faces ongoing trade negotiations and legal challenges. The new tariffs also caused a sharp decline in imports and a dramatic reduction in the U.S. trade deficit in April, signaling major disruptions to global trade flows.