The US recorded a $284 billion budget deficit in the first month of fiscal year 2026, highlighting the challenges faced by the Trump administration in its efforts to significantly reduce federal borrowing needs in the coming years.

Data released by the US Treasury Department on Tuesday showed that, after calendar adjustments, the October deficit narrowed by 29% compared to the same period last year. Revenue rose by 22%, driven by record-high tariff collections.

Adjusted for calendar differences, spending in the first month of fiscal 2026 remained flat. While healthcare expenditures surged, outlays across several federal agencies declined, partly due to Congress’s failure to pass annual funding bills before the fiscal year began on October 1. A temporary funding measure approved on November 12 unlocked a wave of spending, which may be reflected in November’s budget report.

The data indicated that President Donald Trump’s tax policies continue to help curb federal borrowing needs. Net tariff revenue in October totaled $31 billion, exceeding the three-month average of approximately $29 billion.

Treasury Secretary Scott Besant had previously predicted an acceleration in the pace and scale of tariff revenue collection, estimating annual government receipts could reach as high as $500 billion.

**Tariff Uncertainty** However, the Supreme Court is reviewing cases challenging the legality of several Trump-imposed tariffs, casting uncertainty over this revenue stream. Trump recently proposed distributing tariff revenue as dividends to US citizens, which would increase the Treasury’s borrowing requirements.

Meanwhile, mandatory spending on Social Security, healthcare, and public debt interest continues to drive the deficit. Record tariff revenue in fiscal 2025 only partially offset the widening gap, with the annual deficit reaching $1.78 trillion.

Besant has emphasized that the deficit-to-GDP ratio has declined from 6.4% to 5.9%, citing it as evidence of the administration’s policy success. He urged further reduction to "a figure starting with 3" before Trump’s term ends.