The United States budget deficit expanded to nearly $2 trillion in the fiscal year 2026, marking the highest shortfall since 2021, according to data released by the Treasury Department on Friday. The deficit reached $1.99 trillion, a 12 percent increase from the previous year’s $1.78 trillion gap, despite former President Donald Trump’s pledges to reduce public spending.

A significant contributor to the increased deficit was the rising cost of interest payments on the nation’s public debt. Interest expenditures surged by $144 billion to a record $1.36 trillion. This escalation reflects growing yields on Treasury bonds, which have led to higher borrowing costs across the economy, including for mortgages and auto loans. The total publicly held US debt now stands at approximately $32 trillion.

The sharp rise in interest payments adds to concerns about the sustainability of the United States’ overall debt load, currently estimated at $40.3 trillion. Elevated borrowing costs have also intensified economic pressures at a time when inflation remains a key issue, factors that carry implications for voters ahead of the midterm elections scheduled for November.

Another factor widening the budget deficit was the reversal of tariff revenues imposed during Trump’s administration. Earlier this year, the Supreme Court struck down several global duties introduced under Trump, leading to a surge in customs refunds. Treasury data showed $145 billion in tariff-related refunds over the past year, effectively negating much of the revenue initially generated by those tariffs.

This combination of increased interest obligations and tariff refunds has undermined efforts to narrow the budget gap, illustrating ongoing fiscal challenges facing the United States as it navigates economic and political uncertainties.