Congressional Budget Office director Phillip Swagel said Monday that President Donald Trump’s tariffs appear to have pushed inflation up higher than CBO analysts had initially expected.
His views differ from those of Wall Street analysts, many of whom have been bracing for tariff-driven price hikes, but have yet to see them in materialize.
Speaking on CNBC’s “Squawk Box,” Swagel said the CBO analysis shows the economy has weakened since January, which he would expect to exert downward pressure on inflation.
Swagel also shared his office’s long-term view of the impact of Trump’s tariffs: The CBO expects the levies to reduce the U.S. budget deficit by $4 trillion over the next decade by pouring money into the federal coffers.
“So $3.3 trillion of revenue and then $700 billion of averted debt costs,” he said. “That would be a big reversal in terms of the deficit.”
Trump’s tariffs face an uncertain future. The Supreme Court is set to hear oral arguments in early November, after the Trump administration appealed lower court rulings that found the president had exceeded his authority.
Swagel said that the outcome of the Supreme Court tariff case is “one of the key uncertainties in the economy.”
But that uncertainty is likely to fade over time, according to the CBO’s latest report.
“The effects of policy uncertainty dissipate over time and disappear by the end of 2027, returning investment to what it would have been without the uncertainty in trade policy,” the September CBO analysis said.