Ethan Currie and Taylor Schleich of the National Bank of Canada emphasize that the US fiscal trajectory remains unsustainable despite additional tariff revenues. The Congressional Budget Office (CBO) now projects larger cumulative deficits compared to previous forecasts, and the “One Big Beautiful Act” and more stringent immigration policies are making the situation worse. Political uncertainty about future tariff policy adds another layer of risk to the U.S. macroeconomic situation.

Unsustainable deficits and tariff uncertainty

“This won’t make news, but the U.S. federal government is on an unsustainable fiscal path.”

“And while tariffs were promised to be a source of fiscal consolidation, the broader deficit/debt outlook has worsened compared to CBO’s earlier forecasts (January 25) (Figure 2).”

“On balance, this suggests that the primary deficit could decline over the next decade, although we would note that these projections assume policy stability – which is far from guaranteed, particularly with regard to trade.”

“While the protectionist agenda may persist, the White House faces mounting pressure (ahead of the midterm elections) to reduce debt, costs and tariffs.”

“There is also uncertainty as to whether the tariffs will remain in place beyond this administration’s term.”

(This article was created with the lend a hand of an artificial intelligence tool and has been reviewed by an editor.)