An Update from the Congressional Budget Office. *
INTRODUCTION:
The Congressional Budget Office’s November 2025 update shows that rapidly changing tariff policies have significantly reshaped federal budget projections. As of mid November, the effective U.S. tariff rate is about 14 percentage points higher than a year earlier, and CBO now estimates that tariffs implemented in 2025 could reduce federal deficits by roughly $3.0 trillion over the next decade, including lower interest costs. The report explains why these estimates are smaller than earlier projections, highlights exemptions and policy shifts affecting major trading partners. It also underscores the considerable uncertainty surrounding the long term fiscal and economic effects of today’s unprecedented tariff levels.
REPORT SUMMARY:
In its November 20, 2025 update, the Congressional Budget Office (CBO) reports that U.S. tariff policy changes implemented throughout 2025 have significantly increased tariff rates and are projected to materially reduce federal budget deficits over the coming decade. As of November 15, 2025, the effective tariff rate on imported goods is now about 14 percentage points higher than it was one year ago.
According to CBO’s latest estimates, the tariff increases adopted between January 6 and November 15, 2025 are projected to reduce primary federal deficits by $2.5 trillion over the 2025–2035 period. Reduced borrowing needs are also expected to lower federal interest costs by an additional $0.5 trillion, producing a total projected deficit reduction of $3.0 trillion. These budgetary estimates do not yet account for broader economic effects, which will be included in CBO’s upcoming baseline projections.
The updated report also explains why these projections are smaller than CBO’s August 2025 estimates. Key factors include new trade and customs data, shifts in tariff policies (including reductions for certain countries and products), expanded exemptions, and updated modeling assumptions. Notably, CBO now estimates that foreign exporters are absorbing part of the tariff burden by lowering prices, reducing the impact on U.S. consumers and increasing projected tariff revenues relative to earlier forecasts.
At the same time, CBO emphasizes substantial uncertainty surrounding these projections, particularly due to potential future administrative changes, ongoing court challenges to tariff authorities, and the lack of historical precedent for tariffs of this magnitude.
The full CBO report, see link below, provides a detailed breakdown of tariff changes, updated modeling methods, and the fiscal and economic implications of this rapidly evolving trade policy landscape.
CBO’S UPDATED PROJETIONS ON THE BUDGETETARY EFFECTS OF TARIFFS. Posted by Philip Swagel, Director of CBO on November 15, 2025.
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*Established in 1974, The Congressional Budget Office (CBO) is a federal agency within the legislative branch of the United States government. It is charged with providing members of Congress objective analysis of budgeting and economic issues to support the congressional budget process. Each year, CBO economists and budget analysts produce dozens of reports and hundreds of cost estimates for proposed legislation.