Last month’s budget gap, which was partly inflated by calendar shifts in benefit payments, was $141 billion, or 48%, higher than in July 2025 and was the largest monthly deficit since March 2021, when it hit $660 billion due to COVID-19 relief program spending.
There have been only two other higher monthly deficits: $864 billion in June 2020 and $738 billion in April 2020, as the pandemic-driven economic shutdown shattered tax receipts.
A Treasury official said unadjusted outlays for July were also a record for that month at $766 billion, up $137 billion, or 22%, from a year ago. But the month’s outlays were inflated by $99 billion due to the payment in July of many August 2026 benefits because the current month started on a weekend.
Accounting for these and other calendar shifts brought the adjusted July deficit to $333 billion, up $50 billion, or 18%, from the prior year, the Treasury said.
Unadjusted July receipts were down $4 billion, or 1%, to $334 billion. That figure included an outflow of $8.55 billion in net customs receipts after tariff refunds totalling $33.38 billion for the month, marking the third straight month of tariff outflows.
The refund total, driven by the US Supreme Court’s decision to strike down the broad emergency tariffs imposed by President Donald Trump last year, was down somewhat from the $49.2 billion in refunds issued in June.
The US Customs and Border Protection agency said in a court filing last week that it had processed about $100 billion in refunds through the end of July. It initially said that about $166 billion was collected from the now-illegal duties.
But the Trump administration continues to rebuild its tariffs under other legal avenues, last month imposing duties of 10% or 12.5% on 60 major trading partners, covering more than 99% of US imports over lax enforcement of forced labour curbs. More tariff orders are expected in the coming weeks.The nonpartisan Congressional Budget Office now estimates that full-year customs duties collections will be about $250 billion lower than its initial projections in February, diminishing what had been seen as an increasingly important revenue source.
FISCAL 2025 DEFICIT EXCEEDED
Tariff revenue last year helped drive a slight reduction in the 2025 fiscal-year deficit to $1.775 trillion. But the deficit for the first 10 months of the 2026 fiscal year has already exceeded that of the entire 2025 fiscal year, with an unadjusted gap totalling $1.799 trillion. The current fiscal year ends on September 30.
The year-to-date deficit was up $170 billion, or 10%, from the $1.629 trillion reported for the year-ago period. But including calendar shifts, the Treasury said the adjusted fiscal year-to-date deficit would have been $1.700 trillion, up $79 billion, or 5%, from the year-ago period.
Also Read: MCX, NISM sign MoU to set up commodity markets research centre