US Congress budget office sees economic output falling from Trump tariffs

WASHINGTON (Reuters) -U.S. economic output will fall as a result of President Donald Trump's new tariffs on foreign goods that were in place as of May 13, while also reducing federal budget deficits by $2.8 trillion over a decade, the non-partisan Congressional Budget Office said on Wednesday.

In a letter to Senate Democratic Leader Chuck Schumer and two other high-ranking Democrats, the CBO said the tariffs, which have been challenged in court cases, will raise the costs of consumer and capital goods.

"CBO estimates that, on net, real (inflation-adjusted) economic output in the United States will fall as a result," the agency said.

"Inflation will increase by an annual average of 0.4 percentage points in 2025 and 2026, in CBO’s estimation, reducing the purchasing power of households and businesses," the letter to Schumer and Senators Ron Wyden and Jeff Merkley stated.

Wyden is the senior Democrat on the Senate Finance Committee and Merkley is the ranking Democrat on the Senate Budget Committee. The three senators requested the CBO analysis on the impact of the Trump administration's tariffs implemented between Jan. 6 and May 13 through executive actions.

The CBO's inflation estimates were compared to an economic outlook published by the CBO on January 17.

The analysis was completed before two courts ruled that the tariffs exceeded the president's authority to impose them. The administration has asked an appeals court to pause one of the rulings.

(Reporting by Richard Cowan; Editing by Chizu Nomiyama)

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