Baked into the CBO analysis is a prediction that households would ultimately buy less from the countries hit with added tariffs. The budget office estimates that the tariffs would increase the average annual rate of inflation by 0.4 percentage points in 2025 and 2026.
The budget office’s model also assumes that the tariffs, announced through executive action between January and May, will be in place permanently.
Largely confirming what other economic models have predicted, the CBO’s estimations show that the tradeoff for a $2.8 trillion deficit reduction over 10 years would be an overall reduction in household wealth. In addition, the tariffs would shrink the economy, or reduce the rate of the gross domestic product by 0.06 percentage points per year.
A major caveat of the CBO’s estimates is written into the report — its estimates are “subject to significant uncertainty, in part because the Administration could change how the tariff policies are administered.”
A representative from the White House did not respond to an Associated Press request for comment.
