U.S. Budget Deficit Narrows Amid Record Tariff Revenue, Debt Costs Loom
The U.S. federal deficit shrank marginally to $1.78 trillion, a 2.2% decline fueled by an unprecedented $198 billion September surplus—the highest ever recorded for the month. Tariff revenue surged 142% year-over-year to $202 billion, driven by aggressive trade policies targeting Chinese electronics and European steel. Treasury Secretary Scott Bessent framed the deficit-to-GDP ratio easing to 5.9% as progress, though it remains nearly double the historical average.
Beneath the surface, the fiscal strain persists. Debt servicing costs ballooned to $1.2 trillion as borrowing rates climbed, offsetting gains from trade measures. The tariff windfall, while politically contentious, temporarily stabilized finances without addressing structural imbalances. Markets now watch whether this artificial buoyancy can withstand mounting interest payments and slowing global trade.
