US Budget Deficit Reaches 120 Billion Dollars in June as Tariff Refunds and Interest Costs Bite
The United States ran a federal budget deficit of 120 billion dollars in June, a sharp swing from a 27 billion dollar surplus in the same month a year earlier, according to the Treasury Department’s Monthly Treasury Statement released on 13 July. For the first nine months of the fiscal year, from October through June, the deficit reached about 1.37 trillion dollars, up modestly from around 1.34 trillion dollars a year earlier.
Receipts fell 6 percent from a year earlier to 496 billion dollars, while outlays rose 23 percent to 616 billion dollars. Two forces drove the June swing. Customs duties turned into a net outflow as refunds of 49.2 billion dollars, tied to a reversal of earlier tariffs, exceeded gross collections of 23.6 billion dollars. And gross interest on the public debt rose 28 percent, or about 41 billion dollars, to 185 billion dollars in the month, reflecting a larger debt stock and higher rates. A calendar shift that moved some payments out of June a year earlier also flattered the prior-year comparison.
The scale of the reversal is striking, our reading: the move from a 27 billion dollar surplus to a 120 billion dollar deficit is a swing of about 147 billion dollars in a single month, our calculation. Interest alone, at 185 billion dollars, was larger than the entire June deficit, our reading, underlining how debt-service costs are now shaping the fiscal picture even before the tariff-refund distortion.
Why it matters: A widening deficit and fast-rising interest costs mean heavier Treasury borrowing, which keeps upward pressure on US yields and, through them, on global funding costs. For the dollar-pegged Gulf economies, where local rates track US policy and Treasury yields, the trajectory of US borrowing is a direct channel into regional financial conditions.
Outlook: The July statement will show whether the tariff-refund effect fades and where the full-year deficit is heading, while the path of interest costs will hinge on rates and the pace of new issuance.
| Measure | June 2026 | Note |
|---|---|---|
| Budget balance, June | 120 billion dollar deficit | From a 27 billion surplus a year earlier |
| Swing year on year, our calculation | about 147 billion dollars | Surplus to deficit |
| Fiscal year to date, nine months | about 1.37 trillion dollar deficit | Up from about 1.34 trillion |
| Receipts, June | 496 billion dollars | down 6 percent year on year |
| Outlays, June | 616 billion dollars | up 23 percent year on year |
| Gross interest on the debt, June | 185 billion dollars | up 28 percent, above the month’s deficit |
| Customs, June | net outflow | Refunds 49.2 billion vs 23.6 billion collected |
Sources: US Department of the Treasury; Reuters.
