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Trump’s new budget signals the demise of ‘liberation day’

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by Bruce Yandle, opinion contributor - 04/18/26 11:00 AM ET

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by Bruce Yandle, opinion contributor - 04/18/26 11:00 AM ET

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US President Donald Trump, left, and Howard Lutnick, US commerce secretary, during a tariff announcement in the Rose Garden of the White House in Washington, DC, US, on Wednesday, April 2, 2025. Photographer: Kent Nishimura/Bloomberg via Getty Images

The White House has just released its 2027 budget request to Congress, calling for massive increases in defense and border-related spending, serious cuts elsewhere and the same old deficit and debt song and dance. But with his request, President Trump has also dashed prospects for his own dream of ending the supposed “rip-offs” being perpetrated on the U.S. by our international trading partners.

If the anniversary celebration for Trump’s “liberation day” tariffs didn’t already ring hollow, it certainly should now.

Trump has long been vocal in his displeasure toward other countries who sell a lot to Americans but buy less from us. But if the U.S. trade deficit is the enemy, then deficit spending must be as well.

Even with the budget’s highly optimistic assumptions about GDP growth boosting government balance sheets — 3.5 percent real GDP growth in 2026 and 3.1 percent for each of the following three years — an analysis by the Committee for a Responsible Budget links the proposal to continual deficit spending through 2036.

It is interesting that the White House document itself provides no direct deficit calculations. In dollar terms, the annual deficit would be $2.1 trillion in fiscal 2026, $2.2 trillion in 2027, $2 trillion in 2029 and then fall off to $1.3 trillion by 2036.

At the same time, due to considerations such as weak levels of private savings and a public sector that soaks up every dollar it can, Americans are destined to continue consuming more each year than is produced in the 50 states. We are a high consumption, low-saving society. With the exception of 2015, U.S. consumers (both privately and through government) have annually consumed more than the nation produced since 2002.

All of that deficit spending, plus the goods and services that we Americans consume, must come from somewhere. People elsewhere — in China, for example — save more than we do. They have bought U.S. government bonds to fund our deficits, and they sell us goods and services that American consumers are generally glad to have available.

Trump’s long-term answer to the resulting trade imbalance is the tariff. His love affair with these taxes on imports culminated in his so-called liberation day of April 2, 2025. Although his original justification for many of his tariffs has since been struck by the Supreme Court, the policies largely remain in place.

Interestingly enough, on the anniversary of the “liberation day” speech, a day before the budget was released, the White House announced that Trump “threw away the illusions of ‘free trade’ to finally put Americans and America First.” Yes, Trump replaced consumer sovereignty with tariff-based command and control. But now his budget calls for ongoing deficit spending and new debt to support it. This makes his trade-balance dream impossible to achieve.

America’s fiscal history — not its history of free trade — is the real nightmare. We have had a litany of past deficit-cutting efforts, of which some actually made a difference. But now, the deficit weeds in the lawn are suffocating the shrubs. U.S. debt has been downgraded by all three major credit rating agencies.

The interest costs are rising rapidly and now rival our annual spending on national defense. As Cato Institute analyst Romina Boccia points out, “Looking ahead, the federal government’s largest obligations — Social Security, Medicare, Medicaid, and interest on the debt — are projected to consume all federal revenues within little more than a decade.”

Put another way, something has to give.

We had best hope that, rather than fill our harbors with tariff-shaped rocks, Trump will change his tune, keep the free trade doors open and instead focus on controlling our government spending habit.

Bruce Yandle is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University’s College of Business and Behavioral Sciences.

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