US budget deficit grows to nearly US$2 trillion, highest since 2021

The US budget deficit expanded to nearly US$2 trillion in fiscal year 2026, a record high since 2021, according to government data released on Friday. This surge occurred despite President Donald Trump's pledges to reduce public spending, as the $40.3 trillion national debt and inflation concerns continue to mount. The Treasury Department reported the deficit grew by 12% from the previous year, reaching $1.99 trillion.

A major factor in the increased spending was the higher interest payments on public debt, which surged by $144 billion to a record $1.36 trillion. This reflects the ballooning debt and rising bond yields, which have spurred concerns over borrowing costs. Treasury bond yields have climbed this year, impacting mortgage and auto loan rates.

On the revenue side, Trump's tariffs were expected to generate significant income, but the Supreme Court's ruling to strike down his global duties in February led to a wave of refunds. Customs refunds totaled $145 billion, erasing much of the gains from Trump's tariff policies. Government revenues still increased by 3% to $5.40 trillion, but spending rose by 6% to $7.40 trillion, driven by a 6% jump in defense spending to $917 billion. The deficit-to-GDP ratio now stands at 6.2%, slightly higher than the 5.8% rate last year.