Key Points:
- The January budget deficit fell 26% to $95 billion.
- Government revenue jumped while spending grew slowly.
- Customs duties from new tariffs reached nearly $28 billion.
- Fiscal year-to-date deficit is down by $143 billion.
The United States government reported a significantly smaller budget deficit for January. According to data released by the Treasury Department on Wednesday, the gap between what the government spent and what it earned fell to $95 billion. This represents a 26% drop compared to the same time last year.
The improvement happened because tax revenue and other income grew much faster than government spending. Total receipts for the month hit $560 billion, a 9% jump from a year ago. Meanwhile, government spending only rose by 2% to reach $655 billion.
A major driver behind this extra cash is the steep rise in customs duties. President Donald Trump’s tariffs are bringing in billions. In January alone, the government collected $27.7 billion in tariffs. This is a massive increase compared to January 2025, when the government collected only $7.3 billion from similar duties just as Trump was taking office.
The picture looks better for the ongoing fiscal year as well. Since the fiscal year began on October 1, the total deficit has fallen to $697 billion. That is $143 billion less than the government owed at this point last year. Treasury officials noted that while both spending and revenue are at record highs, the deficit itself is not setting records right now.
Calendar timing also played a role in the January numbers. Because of weekends and holidays, some benefit payments shifted around. Without those shifts, the Treasury says the deficit would have been even lower, sitting at just $30 billion.
Interest payments on the national debt showed a rare drop for the month, falling by $12 billion. However, officials explained this was just a technical adjustment related to inflation data delays caused by a previous government shutdown.
Despite that one-month dip, the cost of borrowing remains high. For the first four months of the fiscal year, the U.S. has spent a record $426 billion just on interest payments. While the tariff money is helping close the gap, the cost of servicing the national debt continues to climb.
