In light of US Congressional Budget Office’s (CBO) updated tariff estimates and the incorporation of actual 2025 budget data from Treasury, the Committee for a Responsible Federal Budget (CRFB) now projects debt to rise to 122 per cent of gross domestic product (GDP) by 2035, roughly 2 per cent higher than the CRFB adjusted August baseline and 4 per cent of GDP higher than CBO’s January 2025 baseline.

If the US Supreme Court rules the International Emergency Economic Powers Act (IEEPA) tariffs illegal, debt would rise further to 127 per cent of GDP, it estimates.

Debt would rise even higher—to 128 per cent of GDP—if tariffs were repealed in full or used for deficit-neutral rebates.

In light of US CBO’s updated tariff estimates and the incorporation of 2025 budget data from Treasury, the Committee for a Responsible Federal Budget now projects debt to rise to 122 per cent of GDP by 2035.
If the apex court rules the IEEPA tariffs illegal, debt may rise to 127 per cent of GDP.
Lawmakers should replace any lost tariff revenue and work to put the debt on a sustainable path, it suggested.

If the rebates were set at $2,000 annually regardless of tariff revenue coming in, debt could rise to 138-143 per cent of GDP, depending on if IEEPA tariffs are ruled illegal or not.

Debt projections have continued to rise beyond CBO’s January 2025 budget outlook, deepening a fiscal outlook that was already worrisome. Lawmakers should replace any lost tariff revenue and work to put the debt on a sustainable path, the Committee recommended. The longer they wait, the heavier the burden will be on future generations to restore fiscal stability, it noted.

Updated CBO projections show that tariffs enacted this year will reduce debt (including interest) by $3 trillion till fiscal 2034-35 (FY35), down from the $4 trillion projected in August, according to CRFB.

Excluding dynamic effects, CBO now projects $2.5 trillion of revenue as opposed to $3.3 trillion—with a third of the difference driven by announced policy changes and the other two-thirds due to updated estimates based on improved methods and the latest data.

Accounting for CBO’s updated tariff estimates, the Committee’s debt projections rise from 120 per cent of gross domestic product (GDP) in 2035 under the CRFB adjusted August 2025 baseline to 122 per cent of GDP.

The remaining one-third of the projections update was due to policy changes since August, such as the recent 10 percentage point reduction in tariffs on Chinese goods, product-specific tariffs on certain vehicles and vehicle parts and certain lumber and derivative products, reduced rates for goods from the European Union and Japan, and additional tariffs on India, CRFB noted.

If accounting only for policy changes, CBO’s updated estimates would have been roughly $3 trillion, down from $3.3 trillion and aligned with CRFB estimates.

If the Supreme Court upholds the ruling that IEEPA tariffs are illegal, then the primary deficit impact would likely drop to around $0.7 trillion, or roughly $0.9 trillion after interest, the Committee noted.

Fibre2Fashion News Desk (DS)