A Congressional Budget Office (CBO) report published on Thursday estimated the termination of tariffs under the International Emergency Economic Powers Act (IEEPA) would grow the U.S. deficit by $2 trillion from 2026 to 2036 compared with baseline projections from when the tariffs were in place last year. That sum includes $1.6 trillion in primary deficits, as well as $400 billion in outlays for interest.

The loss of the IEEPA tariffs is a massive blow to the administration’s hopes of tariff revenue not just paying down the nearly $39 trillion national debt, but being used to give rebates to Americans and replace income tax.

However, CBO director Phillip Swagel noted lower levies would provide relief for U.S. companies and consumers battered by nearly a year of elevated import taxes, providing more opportunities to grow U.S. GDP.

“In the most recent outlook, we projected that changes in trade policy since January 2025 would temporarily raise the rate of inflation, reduce real investment, lower the level of real gross domestic product (GDP), and reduce employment,” Swagel said in the report. “The termination of IEEPA tariffs dampens those effects.”

Overwhelming research has indicated tariff revenue has come not from exporters, but rather U.S. importers, and by extension, American businesses and consumers shouldering increased costs. The Federal Reserve Bank of New York found Americans paid for up to 90% of the import taxes. Meanwhile, efforts to close the trade deficit—which Trump noted as the impetus for his tariff policy—had only modest results. Despite about 10 months of steep tariffs, February saw the gap between goods and services the U.S. sold to other countries versus what it bought narrow to $901 billion, according to Commerce Department data. In 2024, the deficit was $904 billion.

Tariffs’ economic impact so far

After nearly a year of IEEPA tariffs, U.S. companies and consumers have felt the weight of the levies on their margins and wallets, respectively. Pantheon Macroeconomics analysts told clients in September, citing data from the Atlanta Fed’s Wage Growth Tracker, tariffs were stunting wage growth as firms held off on raises and hiring to try to buffer margins threatened by increased import costs. Jobs data from the past year shows a 166,000 total loss in blue-collar jobs, which labor economists have attributed, in part, to tariffs disincentivizing companies from hiring domestic manufacturing workers, the opposite of the tariffs’ intended effect to boost reshoring.

“It is striking how soft manufacturing has been because in theory, you put tariffs in place to protect domestic manufacturing, so that domestic manufacturing employment grows,” Laura Ullrich, director of economic research at the Indeed Hiring Lab, previously told Fortune. “And we have seen the opposite of that.”

Companies trying to ease the tariff pain have instead transferred the aches to consumers, who were projected to each pay up to $1,700 more annually as a result of IEEPA tariffs, which raised PCE core goods prices (referring to goods excluding volatile food and energy components) by 2% through 2025, according to Yale Budget Lab data.

Already visible tariff relief

Following the Supreme Court’s ruling, economists have already noted how the reversal of IEEPA tariffs will ease inflation. Updated Yale Budget Lab data reveals a more modest $600 loss per American household as a result of tariffs, including the 15% global levy under Section 122 of the 1974 Trade Act Trump announced after the Supreme Court decision. 

Goldman Sachs economists Alec Phillips, Elsie Peng, and David Mericle wrote in a note to clients last month tariffs accounted for a 0.7% increase in inflation over 10 months, and has likely peaked, with tariffs expected to add just 0.1% to inflation in 2026.

To be sure, it may be a while before consumers see tangible relief. The $175 billion in revenue from the IEEPA tariffs is sitting in the Treasury, and per federal regulations, is accruing interest that must ultimately be paid by U.S. taxpayers, according to a report published on Monday by the Cato Institute. A Cato economist calculated interest would come out to about $700 million per month across nearly 130 million taxpaying households. Moreover, U.S. firms are unlikely to lower prices at the same rate they raised them in the past year. 

“We would not expect companies to lower prices in response to tariff reductions nearly as quickly as they increased them in response to tariff increases,” the Goldman Sachs analysts said.