CBO Breaks Down Trump’s Tariff Plan: Big Win or Big Problem?

The CBO says Trump’s tariffs might help cut the U.S. deficit by trillions, but they could also raise inflation and lower what families can afford, causing concern for many Americans.

(Credit: CNN)

Trump’s Tariff Plan: One of the biggest points that many people say worked well under Donald Trump’s government was the economy. During his time as U.S. President, Trump brought in a tariff plan, which means he added taxes on goods coming from other countries.

This plan was part of his “America First” idea, which was meant to protect American workers, make the U.S. economy stronger, and reduce how much the country buys from others like China. While the plan helped in some areas, a new report says it could also bring problems.

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The U.S. Congressional Budget Office, or CBO, looked closely at the effects of Trump’s economic plan and the tariffs. In a letter sent to Democratic members of Congress, the CBO shared that while Trump’s tariff policy could help lower the federal deficit by $2.8 trillion in the next 10 years, it may also hurt everyday Americans. They said that calling it a big win for the economy might not be right, because of the issues it may cause in the long run.

Inflation May Rise

The CBO shared that the tariffs could lead to a rise in inflation. Prices for things people buy every day may go up. In fact, the report says the average inflation rate might grow by 0.4 percentage points in just one year between 2025 and 2026.

That means the cost of food, gas, and other basics could increase, making life more expensive for many families. People’s purchasing power, which is the amount of things they can buy with their money, would drop. So even though the government would save money by cutting the deficit, regular families might end up spending more.

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Impact on Economy and Trade

Besides inflation, the report says other areas of the economy could be affected. There could be a slowdown in the country’s GDP, which shows how well the economy is doing. Also, the U.S. might start importing fewer products from other countries, especially from places facing Trump’s trade rules. This could create gaps in the market and cause fewer choices for shoppers.

CBO Director Phillip Swagel explained that the government might try changing the tariffs to better control the situation. But he also said it would take time and that right now, this isn’t something the government is actively planning to do.

Farheen Ashraf

Farheen Ashraf is a History graduate. She writes on a variety of topics, including business, entertainment, laws, poetry, stories, travel, and more. Her passion for writing has led her to explore a variety of genres.