U.S. December fiscal deficit hit a record high for the month, but the 2025 fiscal deficit is set to reach a three-year low.

On Tuesday local time, data released by the U.S. Treasury showed that due to record-high spending and adjustments in welfare payment timing, the U.S. government recorded a fiscal deficit of $145 billion in December 2025, up 67% year-on-year, setting a historical high for that month.

Driven mainly by a record surge in customs revenue, the U.S. fiscal deficit for the natural year 2025 narrowed to $1.67 trillion, the lowest level in nearly three years. In the first three months of the 2026 fiscal year (starting October 1), the cumulative fiscal gap was $602 billion. However, last month's tariff revenue slowed to $28 billion, the lowest level since July.

Although President Trump’s increased tariffs on major trading partners have boosted fiscal revenue to some extent, his signature tax cut legislation has begun to show the opposite effect. December data show that corporate income tax revenue fell to $65 billion, down 28% year-on-year. As tax season begins, a large amount of personal income tax refunds will also be gradually issued starting this month.

During the calendar year 2025, tariff revenue reached $264 billion, up about $185 billion from the previous year. However, this part of revenue may be affected by future rulings from the U.S. Supreme Court, which will soon decide on the legality of a series of tariff measures by Trump.

According to estimates released in July this year by the non-partisan Congressional Budget Office (CBO), measures introduced in the "One Big Beautiful Bill Act" are projected to increase the cumulative fiscal deficit by $3.4 trillion over the next ten years, until 2034.

U.S. Treasury Secretary Scott Bessent stated that the narrowing deficit indicates the success of Trump's economic policies. For the fiscal year ending September 30, 2025, the deficit as a proportion of GDP is expected to have dropped from 6.3% in the previous year to 5.9%.

However, some budget analysts pointed out that the above data have been distorted by changes to student loan accounting methods, thereby skewing the ratio. JPMorgan analysts calculate that if these accounting changes are excluded, the actual deficit for fiscal year 2025 will exceed $1.9 trillion, with the share of GDP again surpassing 6%.

The main drivers of the deficit do not lie in the annual appropriations battles between the White House and Congress over so-called "discretionary spending." In the first quarter of the 2026 fiscal year, interest payments on the national debt rose by 15% year-on-year to $355 billion; Medicare spending increased by 9%, Medicaid by 11%, and Social Security spending by 7%.

In the previous quarter, spending on health and human services, social security, and national debt interest amounted to a total of $1.27 trillion, accounting for more than half of the $1.83 trillion in total spending.

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