The United States public deficit has widened further. Between October 2025 and September 2026, the fiscal year that has just ended, the federal government spent 1,992 billion dollars more than it took in, according to data released on Friday by the Treasury Department. That is 12% more than the previous year, or nearly 220 billion dollars more.

The slide owes less to falling revenue than to the momentum of spending. Outlays rose by 386 billion dollars, twice as fast as receipts (+169 billion). Both reached record levels, according to the Treasury, despite the administration’s stated intention to cut spending.

Refunded tariffs and interest costs

Two factors weigh particularly heavily. The first is legal. Early in the year, the Supreme Court struck down most of the new tariffs imposed by Donald Trump, which had brought in 202 billion dollars the previous year. Refunding these surcharges cost the federal government an additional 145 billion dollars over the fiscal year. The president has since introduced new tariffs on trade with the main trading partners of the United States, which offset part of the sums returned.

The second is financial. Interest paid on US debt rose by 144 billion dollars (+12%), to reach 1,360 billion. Over the year, the stock of public debt crossed the 40,000 billion dollar mark, standing at 41,172 billion on 30 September. The yield on the benchmark 10-year Treasury note went from less than 4% in October 2025 to more than 5.20% at the end of September 2026.

Several factors are driving up this borrowing cost, according to the AWP/AFP dispatch: the growth of the debt, uncertainty linked to the conflict in the Middle East, the Federal Reserve’s (Fed) rate hikes to fight inflation, and competition on financial markets from borrowing raised to build artificial intelligence data centres. This last point echoes our analysis of AI debt and the Fed’s trade-offs.

Other items added to the bill. Defence spending rose by 48 billion dollars (+6%), notably because of the conflict in the Middle East. Medicaid and Medicare, the medical and social assistance programmes for retirees and vulnerable populations, each grew by 8%, amounting to 120 billion dollars in additional spending for the Department of Health, despite the cuts voted by the Republican-majority Congress. On the revenue side, the economy’s resilience lifted tax receipts, notably individual income tax, by more than 270 billion dollars, which only partly offset the rise in spending.

An estimated ratio and diverging readings

Relative to the wealth produced, the federal deficit would represent around 6.2% of gross domestic product (GDP) in 2026, compared with 5.9% in 2025. This ratio remains an estimate: GDP figures for the period have not yet been published.

The official discourse traces a different trajectory. Treasury Secretary Scott Bessent has repeatedly stated that the goal is to gradually bring the deficit down towards 3%, while supporting the economy to lift growth to 3%. The International Monetary Fund (IMF), for its part, expects growth of 2.3% this year, according to its annual report on the world economy published earlier this week.

At Oxford Economics, economist Nancy Vanden Houten expects 2027 to “end with a similar deficit”, far from the 3% target, with even “a risk of a larger budget gap if the war in Iran continues during this fiscal year”. She also warns that “the increase in the debt stock as well as in interest rates over a longer period will increase the pressure on government spending”.

Dollar, Swiss franc: the channels to watch

The Treasury figures say nothing about the exchange rate, but they shed light on the mechanisms linking US public finances to the dollar Swiss franc pair. Two forces pull in opposite directions. On the one hand, higher bond yields in principle make dollar investments more attractive, which tends to support the currency. On the other, debt that grows faster than revenue can fuel doubts about fiscal sustainability and weigh on confidence in the greenback. Which of these two readings prevails also depends on the Fed’s policy in the face of inflation, a trade-off described in our article on US inflation in September.

For Swiss exporters, the stakes are concrete. A company that invoices part of its sales in dollars sees the value of that revenue, once converted into francs, vary with the exchange rate. A dollar weakening against the franc erodes their margins; a firmer dollar brings them relief. On top of this comes trade uncertainty, between cancelled tariffs and new surcharges.

The Treasury’s next releases and the trend in long-term rates will show whether the 2026 deficit remains a peak or becomes the norm, as Oxford Economics fears.

Sources

  • Allnews (AWP/AFP): “USA: le déficit public s’est creusé lors de l’année fiscale 2026”