U.S. fiscal year 2025 budget deficit slightly decreases as record tariff revenue offsets surging national debt interest.

The U.S. Treasury Department announced on Thursday that the U.S. budget deficit for fiscal year 2025 has slightly decreased, with record tariff revenues helping to offset the soaring interest payments on U.S. national debt.

In a year marked by intense trade conflicts and high financing costs, the U.S. federal government ultimately recorded a fiscal deficit of $1.78 trillion, about $41 billion less than in fiscal year 2024, a decrease of 2.2%. Although this figure remains historically high, the deficit would have been much more serious were it not for the sharp surge in tariff revenues and a record monthly surplus of $198 billion in September.

The large-scale tariffs imposed by President Trump are the main reason for U.S. tariff revenue reaching $202 billion for the year, a 142% increase over 2024. Tariff revenue in September alone reached $30 billion, a 295% spike compared to the same period last year.

U.S. Treasury officials estimated Thursday that the decline in the deficit will bring the budget deficit as a percentage of GDP down to 5.9%. Since 2022, this ratio has never been below 6%, while in stable periods of the U.S. economy it is typically around 3%.

U.S. Treasury Secretary Bessent mentioned in an interview last week that Congressional Budget Office forecasts show the deficit-to-GDP ratio will fall below 6%. He said: "We are moving toward reducing the debt and deficit burden."

The impact of the deficit is also reflected in U.S. national debt interest payments. Currently, the total U.S. national debt has reached $38 trillion. Total interest payments on the debt exceeded $1.2 trillion, once again setting a record, nearly $100 billion more than in fiscal year 2024.

Excluding interest income from Treasury investments, net interest payments stood at $970 billion—$57 billion more than defense spending—second only to Social Security, Medicare, and Medicaid expenditures, ranking fourth in the federal budget.

Despite criticism that this would fuel inflation, harm consumers, and stifle economic growth, Trump earlier this year still imposed highly controversial high tariffs on U.S. imports.

Although prices of some tariff-affected goods did rise, the overall increase was limited. Federal Reserve officials said they may further lower benchmark interest rates, as the price rises are expected to be temporary. Currently, the federal funds rate ranges from 4.00% to 4.25%.

The U.S. government’s fiscal year ends in September. In the past 12 months, the U.S. government took in $5.2 trillion in revenue, while expenditures slightly exceeded $7 trillion.

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