The US government’s budget deficit decreased by USD 41 billion to USD 1.775 trillion during the 2025 fiscal year, despite seeing a USD 118 billion rise in revenues from tariffs imposed by President Donald Trump, according to a report from the Treasury Department released on Thursday.
The fiscal year ending on September 30, which encompassed almost nine months of Trump’s second term, showed an improvement from the USD 1.817 trillion deficit recorded in fiscal 2024. This marked the first decline in the annual deficit since 2022, attributed to reduced spending following the conclusion of COVID-19 relief programs.
A key factor contributing to the smaller deficit was the record-breaking $195 billion in net customs receipts for the fiscal year, showing a notable increase of USD 118 billion from the previous year due to the implementation of new tariffs under the Trump administration.
In September, customs receipts hit a new peak of USD 29.7 billion, although the rate of growth slowed compared to the USD 29.5 billion collected in August. Total receipts for fiscal 2025 amounted to a record USD 5.235 trillion, marking a significant increase of USD 317 billion, or 6%, from the USD 4.918 trillion in fiscal 2024.
On the expenditure side, fiscal 2025 saw record outlays of USD 7.01 trillion, up by USD 275 billion, or 4%, from the USD 6.735 trillion seen in the previous fiscal year.
A US Treasury official mentioned that the estimated deficit-to-GDP ratio for fiscal 2025 stood at 5.9%, an improvement from the actual 6.3% ratio recorded in fiscal 2024. The Treasury also reported a surplus of USD 198 billion for September 2025, marking a substantial increase of USD 118 billion, or 147%, compared to the same month in the prior year. September typically sees a surplus due to quarterly tax deadlines for both individuals and companies.
Last month’s receipts rose by USD 17 billion, or 3%, reaching USD 544 billion, while outlays decreased by USD 101 billion, or 23%, to USD 346 billion. The surplus in September was largely driven by a USD 131 billion reduction in the Department of Education’s budget as mandated by a legislation passed by the Republican-controlled Congress in July.
Throughout the full fiscal year 2025, the Department of Education experienced the largest reduction in outlays, dropping by USD 233 billion, or 87%, to just USD 35 billion from the previous year. Despite this, spending on programs like Social Security, Medicare, Medicaid, and interest on the federal debt continued to rise.
Interest expenditure reached a record USD 1.216 trillion for the full fiscal year, up by USD 83 billion, or 7%, from fiscal 2024, making it the second largest expenditure category after Social Security. Social Security expenses amounted to USD 1.647 trillion, showing an increase of USD 127 billion, or 8%, from the prior fiscal year.