US Posts Record July Budget Deficit of $432 Billion

The US federal government posted a record July budget deficit of $432 billion, as spending accelerated and tariff refunds pushed customs revenue negative for a third straight month. With two months left in fiscal 2026, the cumulative shortfall has already blown past the full fiscal 2025 deficit.

The July numbers

The July deficit came in at $432.3 billion, the largest monthly shortfall since March 2021, with outlays at $766.3 billion and receipts at $334.0 billion. That figure is 48% larger than the $291.1 billion shortfall recorded in July 2025.

The print also blew past forecasts, which had called for a $346 billion gap. A calendar quirk played a role: August 1, 2026, fell on a weekend, which shifted certain payments into July, and without that timing shift the July FY26 deficit would have been $42 billion larger than the previous year.

Fiscal 2026 already worse than 2025

The deficit for the first 10 months of fiscal 2026 reached $1.799 trillion, already exceeding the $1.775 trillion deficit recorded for all of fiscal 2025. Interest costs rose, and after calendar adjustments the fiscal 2026 gap is tracking 5% wider than 2025.

On Wednesday, the Congressional Budget Office raised its 2026 deficit forecast to $2.1 trillion, roughly $200 billion above its February projection, citing weaker-than-expected tariff and customs collections as the primary driver.

Do you want to see how to make more plays? Do you want to find gains yourself?

Unusual Whales helps you find market opportunities through our market tide, historical options flow, GEX, and much, much more.

Create a free account here to start conquering the market with Unusual Whales.

Where the money went

Government outlays rose to $766 billion from $630 billion in July 2025, led by Medicare spending of $174 billion, with Social Security at $141 billion, net interest at $104 billion, and national defense at $91 billion.

July spending reached $766 billion against $334 billion in revenue, while debt servicing is on track to exceed $1 trillion this year, with Medicare spending and roughly $37.5 billion in war costs with Iran compounding the shortfall.

The tariff refund drag

Tariff refunds drove customs revenues negative for a third straight month. A court filing disclosed last week that about $100 billion in total refunds had been processed through the end of July, out of roughly $166 billion in IEEPA duties originally collected.

After the Supreme Court invalidated IEEPA tariff authority in February, the federal government refunded about $100 billion of $150 billion collected, shifting remaining duties to Section 122 and Section 301 authorities. That has taken a major revenue lever off the table just as spending accelerates.

Options market and stocks to watch

With debt issuance rising and interest costs pushing past $1 trillion annually, rates and the long end of the curve are the cleanest read-through.

• TLT: Watch for flow in the long-bond ETF as traders position around Treasury supply and term premium.
• TMF: The leveraged long-duration play tends to see active options interest on deficit and CPI prints.
• GLD: Watch for hedging demand tied to fiscal deterioration and dollar debasement narratives.
• LMT and RTX: Defense outlays remain a large line item; watch for flow tied to appropriations headlines.
• UNH: Medicare is the single largest driver of July outlays, keeping managed care names in focus.

Want more market intelligence? Create your free Unusual Whales account for options flow, market tide, GEX, and the full toolkit.