The federal government’s budget shortfall for May decreased by $23 billion, dropping 7% to $293 billion, primarily because of timing differences in benefit payment schedules compared to the previous year, according to Wednesday’s announcement from the Treasury Department. Both government spending and revenue declined during the month, with income taking a substantial blow from tariff refund payments related to President Donald Trump’s emergency trade duties.
Treasury officials reported that tariff refund payments reached $21.97 billion in May, while incoming customs revenue totaled $21.93 billion, resulting in a net outflow of $42 million from customs operations during the month.
The refund process began after the U.S. Customs and Border Protection agency started returning approximately $166 billion in trade duties that were collected under the International Emergency Economic Powers Act, which the U.S. Supreme Court ruled unconstitutional in February. Before these refunds began, customs revenue had represented a major income stream for the Treasury, with monthly collections reaching the low $30 billion range in late 2025.
Government revenue for May dropped $36 billion, a 10% decrease to $336 billion when compared to May 2025, while government expenditures fell $59 billion, representing a 9% decline to $628 billion.
However, when accounting for payment timing adjustments that moved some June 2025 disbursements into May of that year, Treasury officials noted that the adjusted May budget shortfall of $293 billion actually represents a $71 billion or 32% increase from the previous year.
For the initial eight months of fiscal year 2026, which began October 1, the cumulative budget deficit reached $1.246 trillion, representing a $118 billion or 9% decrease on an unadjusted basis.
