First decline since 2022: Trump's tariff policy and austerity measures shrink the deficit

The US government's tariff policy is perceived as highly erratic. However, it's currently paying off for the US. Revenues are rising. However, national debt is also climbing to a record high. And this despite the fact that one government department is being almost completely cut.

In the United States, the budget deficit fell slightly in the past fiscal year 2025. It decreased by $41 billion to $1.775 trillion, the U.S. Treasury Department announced in Washington on Thursday (local time).

Higher revenues from the tariffs imposed by US President Donald Trump and drastic cuts in the education budget offset increased spending on healthcare, pensions, and interest payments. In fiscal year 2024, the deficit was $1.817 trillion. This is the first decline in the annual deficit since 2022.

However, experts believe this trend masks fundamental problems. Interest payments on the national debt reached a new record high of $1.216 trillion, making it the second-largest expenditure item after social security. "The fundamentals remain deeply troubling," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

While tariff revenue rose by $118 billion to a record $195 billion in the fiscal year ending September, the Department of Education's budget was cut by $233 billion, or 87 percent. However, this was offset by a $79 billion drop in corporate tax revenue after the Republican-controlled Congress passed tax relief in July.