The Congressional Budget Office has warned that President Trump’s tariffs on China will hurt U.S. GDP and said the comprehensive budget deal the president signed in August will drive up the federal deficit to higher levels than expected.
The U.S. budget deficit is projected to hit $960 billion by October, when the fiscal year ends, according to a CBO report released Wednesday. It is then expected to average $1.2 trillion between 2020 and 2029, a $63 billion increase from the CBO’s May projection largely driven by this month’s budget deal, which raises government-spending limits.
The bipartisan budget bill will lift the debt ceiling until 2021, set a $1.37 trillion limit on agencies’ annual budgets for fiscal year 2020, and raise that limit in fiscal year 2021. It will also essentially end the automatic spending cuts put in place by the 2011 Budget Control Act.
“The nation’s fiscal outlook is challenging,” CBO director Phillip Swagel said. “Federal debt, which is already high by historical standards, is on an unsustainable course.”
The CBO also predicted that the Trump administration’s heavy tariffs on China, the world’s second largest economy, will shave 0.3 percent off the U.S. GDP.
Trump has imposed 25 percent tariffs on $250 billion of Chinese exports and plans to introduce a 10 percent tariff on the rest of the country’s exports to the U.S. in December. China has responded by imposing duties on $110 billion of American imports and boycotting American agriculture products.
President Trump, who has made the economy a cornerstone of his 2020 reelection campaign, downplayed the possibility of a recession over the weekend.
“I don’t see a recession,” the president said. “We’re doing tremendously well. Our consumers are rich. I gave a tremendous tax cut. And they’re loaded up with money.”