Court ruling on Trump’s tariffs may spark $2 trillion budget shortfall over 10 years

The court decision blocking much of President Donald Trump’s extensive tariffs risks creating what some economists estimate could be a $2 trillion deficit in the US budget outlook over the next decade, if the ruling remains effective.

This development also poses a significant challenge for Republicans, who depend on the tariff revenue to help finance a roughly $4 trillion tax cut currently under consideration in Congress, Caliber.Az reports via foreign media.

“At face value, this ruling will take away billions of dollars of prospective tariff revenue” annually, said Douglas Elmendorf, a Harvard Kennedy School professor and former director of the Congressional Budget Office. A federal appeals court put on hold the Court of International Trade’s ruling that had invalidated a large portion of Trump’s tariffs. Meanwhile, the White House is working to overturn the decision entirely and plans to appeal to the Supreme Court.

Should the CIT ruling be upheld, it would eliminate tariffs expected to generate nearly $200 billion annually, according to estimates from Goldman Sachs and Citigroup. The administration had counted on this revenue boost to unite Republican lawmakers behind the president’s “big beautiful bill” tax-cut package.

The $2 trillion in additional revenue projected over ten years would help partially offset the tax cuts, as analyzed by the congressional Joint Committee on Taxation, especially since the bill’s spending cuts are unlikely to cover even half of its cost. If the legal challenge fails, Trump’s trade officials would need to find alternative executive authorities to impose tariffs, a process that economists say could take months and still face legal battles. Treasury Secretary Scott Bessent stated, “anything that the courts do to get in the way both harms the American people in terms of trade and in terms of tariff revenue.”

Even a temporary loss in revenue could cause issues, as the government is currently prohibited from increasing net new debt, forcing the Treasury to use special accounting measures to meet payments. Customs revenue recently reached a record over $16 billion per month, supporting government cash flow. Barclays Plc warned that the court ruling would accelerate the depletion of the Treasury’s cash reserves and extraordinary borrowing capacity, thereby increasing pressure on Republicans to pass the tax bill, which includes raising the debt ceiling.

“The fiscal outlook just got a lot worse as a result of this court ruling,” said Ernie Tedeschi, director of economics at Yale University’s Budget Lab and a former Biden administration official. “Very high tariffs just got less likely.” The Budget Lab estimated that if the ruling stands and tariff levels remain unchanged, revenue over the next decade would drop by about $2 trillion—from roughly $2.7 trillion to $700 billion.

By Naila Huseynova