U.S. budget deficit grows to nearly $2 trillion, highest since 2021

The US budget deficit expanded to nearly US$2 trillion over the past year, marking its highest level since 2021, according to government data released Friday. President Donald Trump had pledged to reduce deficits and government spending since his return to the White House last year. Despite this commitment, the deficit has risen to US$1.99 trillion in fiscal year 2026, a 12% increase from the previous year's shortfall of US$1.78 trillion.

Rising interest payments on public debt, which reached a record US$1.36 trillion due to climbing bond yields, contributed to the budget gap. Treasury bond yields have surged this year, impacting interest rates for mortgages and auto loans. The shortfall was partly due to refunds from Trump's overturned tariffs, with US$145 billion returned to businesses and individuals.

Overall, government revenues grew by 3% to US$5.40 trillion, while spending surged by 6% to US$7.40 trillion. War risks, specifically a potential conflict with Iran, could further increase the deficit in the upcoming year. The Trump administration aimed to reduce the budget deficit to 3% of GDP, but the latest figures indicate a 6.2% deficit-to-GDP ratio, surpassing the 5.8% target set by Treasury Secretary Scott Bessent.

As the US prepares for midterm elections, both parties have proposed measures that could exacerbate the budget gap.