Ten months of red ink already exceed last year's full deficit as Medicare and tariff refunds bite
A US$432bn gap opened in the American federal budget in July, the widest shortfall the US government has ever recorded for that month.
The single-month figure, up about 48 percent from July 2025 and the largest monthly deficit since March 2021, pushed the running total for fiscal 2026 to roughly US$1.8tn, the Treasury Department reported Wednesday.
That 10-month tally, covering October 2025 through July, already tops the full US$1.775tn deficit booked in fiscal 2025, with two months still to go before the year closes on September 30, according to Reuters.
For scale, Canada's entire federal deficit came to $36.3bn in the fiscal year ended March 31, 2025, an improvement from $61.9bn a year earlier, the Department of Finance Canada reported in its annual financial report.
Washington's shortfall for the single month of July ran more than 10 times Ottawa's full-year gap.
Calendar timing inflated the American number.
Because the month began on a weekend, the US Treasury paid out roughly US$99bn in early benefits, including Supplemental Security Income and Medicare payments, CNBC reported.
Stripping out those and other shifts, Reuters said, the adjusted July deficit came to US$333bn, up US$50bn, or 18 percent, from a year earlier.
On the same adjusted basis, the year-to-date gap worked out to about US$1.7tn, up 5 percent.
Medicare drove much of the jump.
Spending on the program hit US$174bn in July, up from US$103bn in June and the single largest outlay of the month, per CNBC, ahead of US$141bn for Social Security and US$104bn in net interest.
Bloomberg reported the Medicare surge was worth US$76bn against July 2024, though most of that reflected calendar differences; on an adjusted basis the increase was closer to US$11bn.
Tariff activity weighed on revenue for a third straight month.
The government issued US$33.4bn in tariff refunds in July, down from US$49.2bn in June, Reuters reported, leaving net customs receipts in negative territory.
Those refunds stem from the US Supreme Court's decision earlier this year to strike down the broad emergency tariffs that US President Donald Trump imposed in 2024.
US Customs and Border Protection had processed about US$100bn in refunds through the end of July, according to a court filing cited by Reuters, against roughly US$166bn initially collected under the duties.
The Trump administration is rebuilding those levies through other channels.
Last month it imposed duties of 10 percent or 12.5 percent on 60 major trading partners covering more than 99 percent of US imports, Reuters reported, tied to enforcement of forced-labour rules.
The nonpartisan Congressional Budget Office now estimates full-year customs collections will run about US$250bn below its February projection.
Debt-servicing costs remain a central pressure on the figures that matter most to fixed-income investors.
Interest paid over the fiscal year to date reached US$1.17tn, Bloomberg reported, a climb of roughly 15 percent that the outlet tied partly to higher Treasury yields.
CNBC put the national debt at US$39.9tn, of which US$32.1tn sits with the public.
Trump has pressed the US Federal Reserve for years to cut rates and ease those costs, CNBC reported, but has held back since his nominee, Kevin Warsh, took over as chairman in May.
Recent soft inflation and payroll data have shifted expectations, though futures traders are not pricing in a rate cut over the next five years.
