The US federal budget deficit widened to $1.37 trillion for the first nine months of fiscal 2026, Treasury Department data released on Monday showed, as a surge in tariff refunds stemming from the Supreme Court's February ruling pushed the gap 2% wider than the same period in 2025. The government has paid back $81 billion in tariff receipts so far in fiscal 2026, which began in October 2025, compared with just $5 billion during the equivalent stretch the prior year. For June alone, the deficit stood at $120 billion.
The refund payments accelerated sharply in recent months, with $49.2 billion returned in June following nearly $22 billion in May. Treasury data show a net decline of $25.6 billion in customs duties for June, after a net loss of $42 million in May. A Treasury Department official told reporters that the spike in refunds is almost entirely because of the Supreme Court decision, with most refunds concentrated in those two months.
Evercore ISI analysts wrote that the refund programme has become large enough to be macroeconomically, fiscally and market-significant this year [Source: Bloomberg]. The firm projects tariff revenue eventually coming in at over $300 billion annually. The $49.2 billion of June refunds and roughly $22 billion of May refunds together totalled more than half of an estimated $166 billion the government is expected to be liable for in total repayments. Separately, the US spent over $1 trillion on interest payments on its debt, up 14%, while military spending climbed 5% over the period.
The refunds follow the Supreme Court's 6-3 ruling on February 20, 2026 in Learning Resources, Inc. v. Trump, which held that the International Emergency Economic Powers Act does not authorise the president to impose tariffs. Chief Justice John Roberts was joined by Justices Sotomayor, Kagan, Gorsuch, Barrett, and Jackson; Justices Thomas, Kavanaugh, and Alito dissented [Source: Tax Foundation]. The decision struck down tariffs Trump had imposed on imports from Canada, China, and Mexico via the 'fentanyl orders' and on imports from all countries via the 'reciprocal order'. Section 232 and Section 301 tariffs remain in effect and were not affected by the ruling.
Within hours of the decision, President Trump issued an executive order imposing a 10% tariff under Section 122 of the Trade Act of 1974 for a period of 150 days, before announcing on February 21 that the rate would immediately rise to 15%, the maximum permitted under that statute. The Supreme Court did not order the Trump administration to issue refunds, leaving that matter to renewed proceedings before the US Court of International Trade. Only importers of record are eligible to claim refunds; retail consumers who paid higher prices as a result of the tariffs have no standing to do so. The Tax Foundation had estimated that more than $160 billion in tariffs were collected under IEEPA before the ruling, and that those levies would have raised $1.4 trillion between 2026 and 2035 had they remained in force [Source: Tax Foundation].
Sources: Bloomberg, The Guardian, Sky News, Tax Foundation, Transport Topics, Council on Foreign Relations, WilmerHale, Perkins Coie, Forbes