January Deficit Shrinks to $95 Billion as Tariff Revenues Soar
Washington, Thursday, 12 February 2026.
The U.S. deficit fell 26% to $95 billion in January as customs duties quadrupled to $27.7 billion. This tariff-driven revenue surge successfully outpaced spending growth, offering a temporary fiscal improvement.
Revenue Gains Outpace Spending
The Treasury Department reported on Wednesday that the federal government recorded a deficit of $95 billion for January 2026, marking a significant decline of $34 billion, or approximately -26.357 percent, compared to the same month last year [1]. This improvement was driven primarily by a robust increase in receipts, which totaled $560 billion—a 9.162 percent increase year-over-year—while outlays grew at a more modest pace of 2 percent to $655 billion [1]. When adjusting for calendar shifts that affected payment timing, the underlying fiscal picture appears even stronger, with the adjusted deficit falling to $30 billion, representing a -63.415 percent reduction from January 2025 [1]. This marks the fourth consecutive month that the gap between government revenue and spending has narrowed [5].
Tariff Impact and Spending Dynamics
A central driver of this revenue surge is the aggressive application of customs duties under the current administration. In January alone, customs receipts skyrocketed to $27.7 billion, up from just $7.3 billion a year earlier [1]. On a fiscal year-to-date basis, net customs duties have reached $117.7 billion, a sharp contrast to the $28.2 billion collected during the same period in the previous fiscal year [1]. While the Department of Government Efficiency (DOGE) was deployed with an ambitious goal to cut $2 trillion in waste, analysts estimate the actual reductions realized through workforce firings have been limited to between $1.4 billion and $7 billion [6]. However, spending was partly alleviated by a $12 billion decline in Treasury interest outlays in January, attributed to downward adjustments on inflation-linked securities [1].
Long-term Fiscal Pressures Mount
Despite the short-term reprieve in January, the broader fiscal horizon remains clouded by structural challenges. The Congressional Budget Office (CBO) released forecasts on Wednesday projecting that the budget deficit for the full 2026 fiscal year will widen to $1.853 trillion, or roughly 5.8 percent of GDP [2][3]. This projection factors in the administration’s “One Big Beautiful Bill Act,” higher tariffs, and stricter immigration policies [4]. While tariffs are expected to add approximately $3 trillion in revenue over time, the CBO warns that these gains will be offset by other policy decisions, resulting in a cumulative deficit increase of $1.4 trillion between 2026 and 2035 [4]. Furthermore, the CBO anticipates that the deficit-to-GDP ratio will average 6.1 percent over the next decade, a level historically unusual for a peacetime economy with low unemployment [2].
Debt Trajectory and Economic Sentiment
The long-term accumulation of debt poses a growing risk to economic stability. The CBO projects that debt held by the public will rise from 99 percent of GDP at the end of 2025 to 120 percent by 2036, surpassing the historical peak set in 1946 [2][3]. Compounding this issue, net interest costs on the federal debt are forecast to more than double, reaching $2 trillion by fiscal year 2035 [2]. Public sentiment reflects these economic anxieties; a Pew Research poll published on February 4, 2026, found that 72 percent of U.S. adults rate economic conditions as fair or poor [3]. While the January data offers a momentary fiscal bright spot, CBO Director Phillip Swagel has cautioned that the overall “fiscal trajectory is not sustainable,” with inflation not expected to return to the Federal Reserve’s 2 percent target until 2030 [3][6].