By Fatima Hussein
WASHINGTON (AP) – President Donald Trump’s sweeping tariff plans will cut $2.8 trillion over a decade, while reducing the economy, reducing inflation rates and reducing overall household purchasing power, according to an analysis released Wednesday by the Congressional Office of Budget and Budget.
The numbers were revealed in a letter sent to Democratic Congress leaders outlining how the Trump administration’s plan to impose broad tariffs on countries around the world will affect American households.
Incorporated into the CBO analysis is the prediction that households will ultimately buy fewer households from countries that have been hit with additional tariffs. The Budget Office estimates tariffs will increase the average annual inflation rate by 0.4 percentage points in 2025 and 2026.
The Budget Office model also assumes that tariffs announced through enforcement action between January and May will be permanently introduced.
File – Bikes will be displayed at Walmart in Groton, Connecticut on Wednesday, April 16th, 2025 (AP Photo/Julia Demarinikinson, File)
File – Empty shopping carts will be collected from the parking lot at the Walmart store in Burbank, California on Thursday, April 10th, 2025 (AP Photo/Damiand Balgen, File)
File – President Donald Trump speaks to Washington reporters at the White House oval office on Friday, May 23, 2025. (AP Photo/Evan Vucci, file)
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File – Bikes will be displayed at Walmart in Groton, Connecticut on Wednesday, April 16th, 2025 (AP Photo/Julia Demarinikinson, File)
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Since the analysis was conducted, federal courts have broken down the swept tariffs Trump has been called under the Emergency Act. The appeals court has allowed the Trump administration to continue collecting tariffs while the lawsuit is appealed.
CBO estimates that have largely confirmed what other economic models are forecasting, show that the trade-off of a 10-year, $2.8 trillion deficit reduction will be an overall reduction in household wealth. Additionally, tariffs will either shrink the economy or reduce the speed of gross domestic product by 0.06 percentage points per year.
An April report from the Penn-Wharton budget model predicted that Republican presidential tariffs would cut long-term GDP by about 6% and wages by 5%.
The main warnings for CBO estimates are listed in the report. That estimate is “affected by significant uncertainty as it may control how tariff policy is managed.”
Trump often announces changes to his tariff plans on his social media platform and is suspended.
In April, he posted that for 90 days he would retreat the tariffs of most countries and jack the tax rate on Chinese imports to 125%.
Last week he announced plans to impose a 50% penalty on tariffs on steel and aluminum imports. The 50% tariff came into effect Wednesday.
The Economic Co-operation and Development Agency predicts that the world’s largest U.S. economy will reduce 2026 growth to just 1.5% on Tuesday.
White House representatives did not respond to Associated Press’ request for comment
Washington Associated Press Writer Paul Wiseman contributed to the report.
Original issue: June 4th, 2025, 2:09pm EDT
