Can Tariffs Save the U.S. Budget? A Deep Dive into Deficits, Debt, and Dollars

In a time of economic uncertainty, ballooning debt, and rising prices, Americans are asking more questions about how the federal government manages its money. One of the hottest debates right now is whether increased tariffs and a reduction in government spending could finally bring the United States back to a balanced budget. With Donald Trump proposing a fresh wave of tariffs and fiscal conservatives rallying behind deep spending cuts, the idea is gaining momentum. But can it really work? And if so, at what cost?

Let’s unpack the entire picture.

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The Federal Budget: What We Spend vs. What We Earn

In fiscal year (FY) 2024, the U.S. federal government spent $6.75 trillion while collecting only $4.9 trillion in revenue. That left a budget deficit of $1.85 trillion.

Where does the government get the money to cover this shortfall? It borrows—primarily by selling Treasury bonds to investors, banks, foreign governments, and even the Federal Reserve. These bonds promise to pay back the borrowed amount with interest, usually over a period of 10 to 30 years.

This borrowing adds to the national debt, which is now well over $34 trillion. And every year, the interest payments alone are getting steeper. In FY 2024, the U.S. paid a record $882 billion in interest on its debt.

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So Why Not Just Print the Money?

This is where the Federal Reserve comes in. While the Treasury issues debt, the Fed can buy that debt with newly created money, a process often referred to (sometimes inaccurately) as “printing money.”

The Fed doesn’t hand cash directly to the Treasury. Instead, it buys Treasury bonds in the open market and credits banks with reserves. This increases the money supply and injects liquidity into the economy.

If this sounds inflationary, that’s because it can be. Too much money chasing too few goods is the textbook recipe for inflation. And when deficit spending is habitual—year after year, regardless of economic conditions—the cumulative effect becomes hard to ignore.

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Enter Tariffs: A New Source of Revenue?

So here’s the big idea being floated: If tax revenue isn’t enough, why not tax imports? That’s what tariffs do.

A tariff is a tax on imported goods. When a U.S. importer brings in products from another country, they pay a fee to the U.S. government. In 2023, tariffs brought in around $79 billion. Not bad, but still only about 4% of the annual deficit.

But what if we tripled tariffs? That could potentially bring in over $240 billion annually.

That’s the Trump campaign’s wager. By expanding tariffs to cover more goods and increasing the rates, the government could bring in hundreds of billions more—revenue that comes from outside the U.S. tax base.

It sounds like a win-win: Protect American industries and raise money.

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The Risks of Tariffs

However, tariffs don’t come without trade-offs. For one, they usually lead to higher prices for American consumers. When importers face extra costs, those are often passed on to the end customer.

Additionally, foreign countries may retaliate by placing tariffs on American exports, hurting our farmers, manufacturers, and exporters.

There’s also the risk that companies will simply find alternative suppliers or restructure their supply chains to avoid tariffs, reducing the long-term revenue they generate.

So yes, tariffs could raise revenue, but they are unlikely to fully close the deficit, and they may create inflationary pressures of their own.

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What About Cutting Spending?

Here’s where the real power lies. If tariffs can’t fully bridge the gap, then spending cuts are the only other lever to pull.

But this isn’t easy. Most federal spending is tied up in mandatory programs like:

• Social Security ($1.4 trillion)
• Medicare ($1.0 trillion)
• Medicaid and CHIP ($600 billion)
• Interest on the debt ($882 billion)

Then you have discretionary spending:

• Defense ($850 billion)
• Everything else (transportation, education, housing, etc.) at around $2 trillion

To eliminate a $1.85 trillion deficit, you’d need to cut spending by around 25% across the board. That means slashing deeply into politically sensitive and legally protected areas.

It can be done, but it requires immense political will and likely significant short-term pain.

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The Path to a Balanced Budget?

Let’s say you triple tariffs to bring in an extra $160 billion. Let’s also say you cut government spending by $1.7 trillion.

You now have a balanced budget.

But the real-world implementation of this would be politically explosive:

• Which programs get cut?
• How do you prevent tariffs from fueling more inflation?
• How do you manage public backlash?

And perhaps most importantly: How do you stop future Congresses from simply spending more again?

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Why Chronic Deficits Are Dangerous

Let’s not lose the forest for the trees. The real issue isn’t just this year’s deficit—it’s the habit of running deficits.

• Chronic deficits mean a constantly rising national debt.
• Rising debt means higher interest payments.
• Higher interest means less money for everything else.
• And if the Fed helps cover the gap, the result is inflation.

We’ve already seen how this plays out. COVID-era stimulus spending (much of it necessary at the time) was fueled by huge deficits and a surge in money creation. The result? The highest inflation in 40 years.

If we don’t stop the bleeding now, we risk even worse outcomes: weakening the dollar, spooking investors, or facing a debt crisis.

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Conclusion: A Reckoning Is Coming

There is no free lunch in economics. For decades, the U.S. has enjoyed the luxury of borrowing cheaply and running deficits without consequence. But the bill is coming due.

Tariffs alone won’t solve the problem—but they could be part of a broader fiscal realignment. Paired with genuine spending restraint, they might finally bend the curve.

Balancing the budget isn’t just a numbers game. It’s a test of national priorities, political courage, and economic foresight.

Let’s hope we’re up to the challenge.

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