EddieJayonCrypto
15 Sep 25
The CBO director suggests Trump's tariffs may have increased inflation more than expected, contradicting Wall Street's current views. The CBO also highlights that the tariffs could reduce the U.S. budget deficit by $4 trillion over the next decade through increased revenue and reduced debt costs. ...
**Tariffs and Inflation: CBO Contradicts Wall Street on Trump’s Impact** Congressional Budget Office (CBO) Director Phillip Swagel has thrown a wrench into the debate over President Donald Trump’s tariffs, claiming they’ve likely pushed inflation higher than initially anticipated. His remarks, delivered on CNBC’s *Squawk Box*, challenge the prevailing view of Wall Street analysts, many of whom have watched for signs of price hikes but haven’t seen them materialize yet. Swagel’s analysis hinges on a surprising twist: while tariffs are often blamed for inflating prices, the CBO argues the economy has weakened since January, which could actually *lower* inflation. “The economy has softened more than we expected,” he said, noting that weaker growth might temper the inflationary effects of tariffs. But the bigger story isn’t just about inflation—it’s about the long-term fiscal math. Swagel revealed that Trump’s tariffs could slash the U.S. budget deficit by **$4 trillion over the next decade**, with **$3.3 trillion in additional revenue** and **$700 billion in averted debt costs**. “That would be a big reversal in terms of the deficit,” he said, painting a picture of a fiscal windfall that could reshape federal finances. Yet, the future of those tariffs remains a dicey gamble. The Supreme Court is set to weigh in on the legality of Trump’s trade policies, with oral arguments expected in early November. Lower courts have ruled the president overstepped his authority, and Swagel called the case “one of the key uncertainties in the economy.” The CBO, however, suggests that uncertainty won’t linger forever. Its September report noted that the effects of policy ambiguity “dissipate over time” and should vanish by **2027**, restoring investment to pre-uncertainty levels. That timeline, though, leaves plenty of room for volatility in the meantime. So where does this leave investors and consumers? Wall Street’s wait-and-see approach contrasts with the CBO’s more hawkish take on inflation and fiscal gains. Meanwhile, the Supreme Court’s decision could pivot the entire narrative, either clearing the way for tariffs to stick or scuttling them entirely. As the dust settles, one thing is clear: Trump’s trade war is far from over—and its economic ripple effects are only just beginning to show.