US budget deficit falls to $1.775T in 2025 amid tariffs and education cuts

UPDATED: Oct 17, 2025 02:56 IST

The US budget deficit shrank by USD 41 billion to USD 1.775 trillion in the 2025 fiscal year, despite a USD 118 billion increase in revenues from President Donald Trump's tariffs, the Treasury Department reported on Thursday.

The results for the year ended September 30, which include nearly nine months of Trump's second term in the White House, compared to a USD1.817 trillion deficit in fiscal 2024. It was the first time the annual deficit had fallen since 2022, when the unwinding of COVID-19 relief programs brought spending down.

The smaller deficit was aided by a record $195 billion in net customs receipts for the fiscal year, an increase of USD 118 billion from the prior year as new Trump tariffs rolled in.

Customs receipts in September reached a new record high ofUSD 29.7 billion, but the pace of increase slowed from August, when USD 29.5 billion was collected.

Total receipts for fiscal 2025 were a record USD 5.235 trillion, up USD 317 billion, or 6 per cent, from the USD 4.918 trillion in fiscal 2024.

Fiscal 2025 outlays also were a record at USD 7.01 trillion, up USD 275 billion, or 4 per cent, from the USD 6.735 trillion in the prior fiscal year.

TREASURY REPORTS RECORD SURPLUS FOR MONTH OF SEPTEMBER

A US Treasury official said the department calculated an estimated deficit-to-GDP ratio of 5.9 per cent for fiscal 2025, but declined to say what GDP estimate was used. This figure compares to an actual 6.3 per cent deficit-to-GDP ratio for fiscal 2024.

For the 2025 fiscal year's final month of September, the Treasury reported a record surplus of USD 198 billion, up USD 118 billion, or 147 per cent, from the same month in the prior year. September is often a month of surplus due to quarterly tax filing deadlines for companies and individuals.

Receipts last month were up USD 17 billion, or 3 per cent, to USD 544 billion, while outlays were down USD 101 billion, or 23 per cent, to USD 346 billion.

The latest monthly surplus was boosted by a USD 131 billion cut to the Department of Education budget that was mandated in the spending and tax-cut bill passed by the Republican-controlled Congress in July. For September, the education outlays were $123 billion lower than in September 2024.

For the full 2025 fiscal year, the Department of Education suffered the biggest cut in outlays, down USD 233 billion, or 87 per cent from the prior year to just USD 35 billion.

That cut and the higher customs receipts masked continued increases in outlays for the Social Security retirement plan, the Medicare and Medicaid healthcare programs and interest on the US federal debt.

The interest expenditure reached a record USD 1.216 trillion for the full fiscal year, up USD 83 billion, or 7 per cent, from fiscal 2024, making it the second-largest expenditure item after Social Security. Expenses for that program reached USD 1.647 trillion, up USD 127 billion, or 8 per cent, from the prior fiscal year.

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