US July deficit hits record $432 billion as tariff refunds drain revenue

The US federal government recorded a $432 billion budget deficit in July, the largest monthly shortfall since March 2021 and a record for the month, according to Treasury data released Wednesday.

The gap widened by 48% from a year earlier, partly due to calendar shifts that moved some August benefit payments into July. Adjusted for those shifts, the deficit was $333 billion, up 18% year-on-year.

Outlays for the month rose 22% to $766 billion, including $99 billion in benefits paid early because August began on a weekend. Receipts dipped 1% to $334 billion.

A key factor was a third consecutive month of negative customs receipts. Tariff refunds totaling $33.38 billion in July, following the Supreme Court's rejection of broad emergency duties, produced a net outflow of $8.55 billion. Refunds have now reached roughly $100 billion, against about $166 billion originally collected under the invalidated tariffs.

The administration is rebuilding tariffs through other legal channels, including new duties on 60 trading partners over forced-labor enforcement. The Congressional Budget Office now expects full-year customs collections to be about $250 billion below initial projections.

For the first 10 months of fiscal 2026, the unadjusted deficit stands at $1.799 trillion, already exceeding the $1.775 trillion recorded for all of fiscal 2025. The year-to-date gap is 10% wider than the same period last year.