Tariff Refunds Drive U.S. June Budget Back Into Deficit After Court Ruling Against Trump Trade Polic

BY MIRABEL ODETA

The U.S. federal government recorded a budget deficit of $120 billion in June, marking a significant reversal from the $27 billion surplus reported during the same month a year earlier. According to figures released by the U.S. Treasury Department, the change was largely driven by rapidly increasing refunds issued to businesses and importers after courts ruled that many of President Donald Trump’s tariffs had been imposed unlawfully.

Treasury data showed that the government collected $23.6 billion in gross customs duties during June but paid out $49.2 billion in tariff refunds. As a result, customs operations produced a net outflow of $25.6 billion for the month, highlighting the financial impact of court-ordered repayments tied to tariffs introduced under the International Emergency Economic Powers Act (IEEPA).

The growing refunds stem from a U.S. Supreme Court decision issued in February that struck down some of Trump’s broadest global tariffs, ruling that they exceeded the authority granted under the IEEPA. Following that decision, the federal government began processing repayments to companies that had paid the affected import duties.

Refund payments first accelerated in May, when approximately $22 billion was returned to importers, resulting in a slight net customs outflow. June refunds more than doubled that amount, reflecting the increasing pace of repayments as additional claims were processed. Together, the refunds issued during May and June totaled around $71 billion, representing roughly 42% of the $166 billion in IEEPA-based tariffs previously collected by U.S. Customs and Border Protection that are now subject to reimbursement.

The latest budget figures stand in sharp contrast to June 2025, when tariff collections were viewed as a major source of additional government revenue. At that time, net customs receipts reached $26.6 billion, pushing fiscal-year tariff collections above $100 billion for the first time. Treasury Secretary Scott Bessent had described those results as evidence that the administration was benefiting financially from its tariff strategy, arguing that increased import duties were generating substantial revenue for the federal government.

That outlook has changed considerably following the court rulings. Instead of adding to government income, tariff collections are now being offset by large refund payments, reducing overall federal revenue and contributing to wider monthly budget deficits.

The administration’s broader trade policy also remains in transition. A temporary 10% global tariff is scheduled to expire on July 24, while administration officials continue developing new trade measures targeting countries they accuse of failing to enforce anti-forced labor laws or maintaining excessive industrial production that they believe harms American manufacturers. These proposed tariffs could reshape future customs revenue depending on their legal standing and implementation.

Legal disputes over the tariff refunds are continuing. A federal judge recently criticized the government’s appeal of an order requiring repayment of all tariffs deemed illegal, warning that ongoing litigation is delaying refunds owed to affected businesses. The case remains under review, leaving uncertainty over when the remaining repayments will be completed.

A Treasury Department official declined to provide guidance on how much additional money may ultimately be refunded or how long the reimbursement process is expected to continue.

The surge in tariff refunds significantly affected the government’s overall revenue during June. Total federal receipts fell by $31 billion, or approximately 6%, to $496 billion compared with June 2025. June is typically one of the stronger months for government revenue because it includes quarterly estimated tax payments from many businesses and individual taxpayers.

At the same time, federal spending continued to increase. Government outlays reached $616 billion during June, representing an increase of $117 billion, or 23%, from the same month last year. Treasury officials noted, however, that spending comparisons were influenced by calendar-related timing differences. Certain benefit payments scheduled for June 2025 had instead been issued in May because of the calendar, reducing reported spending during that month. After adjusting for those timing differences, the June 2026 budget deficit was approximately 79% larger than the comparable adjusted deficit recorded a year earlier.

Interest payments on the rapidly growing national debt also remained one of the federal government’s largest expenses. Gross interest costs increased by $41 billion, or 28%, reaching $185 billion during June. Part of that increase was offset by a $10 billion rise in interest income earned by federal trust funds, which totaled $70 billion for the month.

For the first nine months of fiscal year 2026, the federal budget deficit reached $1.367 trillion, an increase of $29 billion, or 2%, compared with the same period in the previous fiscal year. Government receipts during that period climbed 4% to $4.151 trillion, while total spending increased 3% to $5.518 trillion, reflecting continued growth in federal expenditures despite stronger tax collections.

Even after accounting for the substantial refunds, customs duties have continued to generate more revenue than in the previous fiscal year. Net customs receipts for the first nine months of fiscal 2026 totaled $163 billion, compared with $108 billion during the same period in fiscal 2025. However, economists say the final contribution of tariffs to federal finances will depend on the outcome of ongoing legal challenges, the pace of additional refunds, and the administration’s future trade policies.

The latest Treasury report underscores how legal decisions surrounding tariff authority are reshaping the federal government’s finances. While tariffs initially boosted revenue and were promoted as a key component of the administration’s economic strategy, the growing volume of court-ordered refunds has reversed much of those gains, contributing to a wider budget deficit and creating fresh uncertainty over the long-term fiscal impact of U.S. trade policy.