US budget deficit balloons to $1.37 trillion as tariff refunds surge after Supreme Court ruling

The US federal budget deficit widened 2% to $1.37 trillion in the first nine months of fiscal 2026, Treasury Department data showed on July 13, 2026. The shortfall for June alone hit $120 billion, reversing a months-long narrowing trend driven by strong tax receipts and customs revenue from Trump-era tariff hikes. The reversal stems from a Supreme Court decision in February striking down most of those tariffs, which triggered a flood of refunds totaling $49.2 billion in June and nearly $22 billion in May. Analysts noted the net decline in customs duties reached $25.6 billion in June after a $42 million loss in May, with refunds already exceeding half of the estimated $166 billion the government owes. Evercore ISI analysts described the refund program as “macroeconomically, fiscally and market-significant,” but emphasized it represents a temporary deficit increase. The administration is moving to rebuild tariff revenue through new measures, including investigations into forced-labor violations in about 60 countries, which could lead to additional levies. Evercore ISI projects annual tariff revenue could eventually exceed $300 billion. Meanwhile, total spending rose 3% during the fiscal year so far, driven by higher outlays for Social Security, Medicare, Medicaid, and debt interest payments. The widening deficit risks reminding bond investors of the scale of US borrowing.