Friday’s Supreme Court decision ending President Donald Trump’s reciprocal tariffs will exacerbate the nation’s financial crisis, analysis of the decision shows.
“With today’s Supreme Court ruling affirming the illegality of President Trump’s emergency tariffs, the country will now be about $2 trillion deeper in the hole,” Committee for a Responsible Federal Budget (CRFB) President Maya MacGuineas said, announcing the organization’s findings.
“With the national debt already the size of the entire U.S. economy and interest on the debt costing more than $1 trillion this year, this is very bad news,” MacGuineas said, calling on Congress to take action to offset the lost revenue.
“Whatever one feels about the tariffs themselves, the country needs that $2 trillion in fiscal improvements, all of which should be dedicated to deficit reduction,” MacGuineas said.
One option CRFB proposes is to enact a border-adjusted cash flow tax, a Destination-Based Cash Flow Tax (DBCFT) business consumption tax:
“This tax would somewhat resemble tariffs because it includes a ‘border adjustment’ that effectively taxes imports (while making exports deductible).
“A DBCFT of 8 or 9 percent would be enough to replace the lost tariff revenue. At about 25 percent, it could replace the lost tariffs and corporate income tax. Removing the deduction for wages would essentially turn the DBCFT into a value-added tax (VAT), which could generate the needed revenue with a 3 to 5 percent rate.”
If the border-related tax option isn’t employed, some other action must be taken, CRFB warns:
“Failing to offset the loss of revenue at all would leave the debt on an even more unsustainable path, rising to 126 percent of GDP by 2035 as opposed to 120 percent under the CRFB Adjusted August 2025 Baseline. Either scenario would result in debt being substantially above current levels and the prior record that resulted from World War II (106 percent of GDP).
“The higher the debt rises, the more policymakers put our economy and budget at risk.”
The U.S. debt currently exceeds $38 trillion, or more than $113,000 for every person in the country.
The national trade deficit was $70.3 billion last December, the Bureau of Economic Analysis reported Thursday.
