Tariff revenue should largely offset new tax cuts

The budget reconciliation bill currently working its way through the House of Representatives, which includes a permanent extension of the original Trump tax cuts plus cut-down versions of his campaign pledges, should be mostly offset by the additional custom duties from the tariffs. The upshot is that we expect the budget deficit to be broadly unchanged at close to 6% of GDP over the next few years, although that would still leave the debt burden on track to reach nearly 120% of GDP by 2034.