May Budget Deficit Shrinks but Customs Collections Turn Negative Due to Tariff Refunds

The U.S. budget deficit for May fell $23 billion or 7% to $293 billion due largely to prior-year calendar shifts in benefit payments as both outlays and receipts fell, with the latter taking a big hit from refunds of President Donald Trump’s emergency tariffs, the Treasury Department said on Wednesday.

Customs duty refunds totaled $21.97 billion in May against gross customs collections of $21.93 billion, making for net customs outflows of $42 million for the month, the Treasury said.

The U.S. Customs and Border Protection agency began issuing refunds of some $166 billion in tariffs collected under the International Emergency Economic Powers Act that were declared illegal by the U.S. Supreme Court in February. Prior to this, customs duties had become a significant source of Treasury monthly receipts, reaching into the low $30 billion range late last year.

Total receipts for May fell $36 billion or 10% to $336 billion compared to May 2025, while outlays fell $59 billion, or 9% to $628 billion.

But taking into account calendar shifts of some June 2025 payments into May that year, the Treasury said the adjusted May budget deficit at $293 billion would be an increase of $71 billion or 32% from the prior year.

The budget deficit for the first eight months of the fiscal 2026 year starting Oct. 1 totaled $1.246 trillion, a decline of $118 billion or 9% on an unadjusted basis.

(Reporting by David Lawder; Editing by Andrea Ricci)

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