National Bank Of Canada’s Ethan Currie and Taylor Schleich stress that the U.S. fiscal trajectory remains unsustainable despite additional tariff revenues. The Congressional Budget Office (CBO) now projects more cumulative deficits versus its prior outlook, with the One, Big, Beautiful Bill and stricter immigration policy worsening the picture. Political uncertainty over future tariff policy adds another layer of risk to the U.S. macro backdrop.

Unsustainable deficits and tariff uncertainty

"This won’t come as news, but the U.S. federal government is on an unsustainable fiscal path."

"And even though tariffs were promised to be a source of fiscal consolidation, the broader deficit / debt burden outlook has worsened relative to the CBO’s prior (Jan-25) projections (Chart 2)."

"Taken together, this suggests that the primary deficit could step down over the next decade, though we’d note these projections assume policy stability—which is far from guaranteed, especially in regard to trade."

"While a protectionist agenda may persist, the White House is facing increasing pressure (ahead of midterm elections) to rein in debt, costs, and tariff rates."

"Uncertainty about whether tariffs will remain in place following this administration’s tenure also exists."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)