Treasury reports a record $404 billion October deficit as tariff revenue drops 39%
The US government’s official monthly figure shows fiscal 2027 opening with the largest October shortfall on record as spending rose and tariff receipts fell.
The US government started the 2027 fiscal year with a $404 billion budget deficit in October, the Treasury Department said on Thursday1,5.
It was a record deficit for the month of October1.
Tariff revenue fell roughly 39% from the same month in 2026, to $19.2 billion3.
Higher spending on the military, healthcare and interest also weighed on the balance3.
The Congressional Budget Office had earlier estimated that the deficit topped $400 billion in the first month of the new fiscal year2.
The record shortfall in the first month of the fiscal year came as receipts from tariffs fell sharply from a year earlier1,3.
The figure confirms that the government’s borrowing needs remain large at the start of fiscal 20275,6.
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Tariff refunds and spending
Treasury’s tariff revenue stabilised as refund payments slowed4.
The Treasury paid out $6.7 billion in tariff refunds last month, compared with $19.4 billion in September4.
Treasury figures put the monthly deficit at $404 billion4,6.
The record October deficit marks another fiscal setback for Treasury Secretary Scott Bessent1.
The Committee for a Responsible Federal Budget responded with a statement from its president, Maya MacGuineas, noting that the government is only one month into the fiscal year6.
The fall in refund payments to importers from September to October helped steady the tariff revenue line in the monthly statement4.
Even so, collections from tariffs were well below the level of a year earlier3.
Why it matters to investors
The size of the deficit determines how much debt the Treasury must sell, which feeds into supply in the bond market1,3.
Lower tariff receipts reduce one of the revenue sources the administration has relied on3.
Slower refund payments mean less cash is flowing back to importers than in September4.
The CBO’s earlier estimate and the Treasury’s figure both point to a deficit above $400 billion for the month1,2.
Budget watchers will look at whether spending on interest and the military keeps rising in the coming months3,6.
Investors will also watch how tariff collections develop as refunds slow4.
The record October gap adds to the Treasury’s borrowing needs in the opening month of the fiscal year1,5.
Sources
- US starts 2027 fiscal year with record October budget deficit of $404 billion | Reuters, reuters.com (2026-11-12)
- US starts 2027 fiscal year with record October budget deficit of $404 billion - Yahoo Finance, finance.yahoo.com (2026-11-12)
- US Records $404 Billion Deficit in First Month of Fiscal Year - Bloomberg Law, news.bloomberglaw.com (2026-11-12)
- US Records $404 Billion Deficit in First Month of Fiscal Year - Bloomberg.com, bloomberg.com (2026-11-12)
- US starts 2027 fiscal year with record October budget deficit of $404 billion - AOL.com, aol.com (2026-11-12)
- Treasury Confirms $404 Billion Deficit for First Month of Fiscal Year 2027, crfb.org (2026-11-12)
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