WASHINGTON – President Donald Trump's tariffs would reduce federal deficits by $2.8 trillion over the next 10 years, according to a new nonpartisan analysis released on June 4.

However, the report from the Congressional Budget Office also noted that tariffs would slightly reduce economic output in the United States by 0.6% over the next 10 years, and contribute to a moderate 0.4% increase in inflation over the next year because the cost of consumer goods is expected to rise as a result of tariff policy.

The CBO report is a partial win for the Trump administration's second-term economic agenda, which has roiled financial markets and been held up in U.S. courts.

The report analyzes the tariffs in place as of May 13, including an increased tariff on China and Hong Kong; tariffs on auto parts, steel and aluminum; and the president's 10% across-the-board tariffs implemented in early April. It does not include the deal between the United States and the United Kingdom in early May that lowered tariffs between the two countries.

The analysis also assumes that the tariffs will remain in place – which is no guarantee, as Trump has repeatedly tweaked the policy amid market swings – and assumes that tariffs will be collected on all imports without exception.

CBO completed its work before two courts ruled that the tariffs exceeded the president's authority to impose them. An appeals court said Trump can continue to levy the tariffs while the administration appeals the decision.

In comparison, Goldman Sachs estimates the president's tariffs will increase the Fed’s preferred annual inflation measure from 2.5% in April to 3.6% by December. Moody’s Analytics is more pessimistic about the effects of tariffs on the economy, predicting the nation’s gross domestic product will be 1% smaller, rather than 0.6%, because of the import fees.

It may also be a boon to Congressional Republicans, who have argued that the massive cost of the tax and policy bill working its way through the Capitol will be offset by the president's tariffs.

A separate CBO report released on June 4 estimated that the Republican bill that passed the House in May would add $2.4 trillion to the federal deficit over the next 10 years.

The future of Trump's tariffs has been in flux as the administration negotiates potential trade deals before a July 8 deadline as part of a 90-day pause on some tariffs the president imposed and then halted earlier this year.

But Trump has been forging ahead amid the uncertainty, announcing on May 30 that he was doubling his tariffs on steel and aluminum imports from 25% to 50%.

"Rest assured, tariffs are not going away," Commerce Secretary Howard Lutnick said on June 1. Trump "has so many other authorities that even in the weird and unusual circumstance where this (power) was taken away, we just bring on another or another or another."

Contributing: Reuters, Paul Davidson

This article originally appeared on USA TODAY: Trump's tariffs to curb US economic growth while reducing deficit: CBO report

Reporting by Riley Beggin, USA TODAY / USA TODAY

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