The US federal budget deficit reached $404 billion in October 2026, marking a 42% increase year-on-year and the first month of fiscal year 2027, according to US Treasury Department data.

Government spending rose 12% to $773 billion, while tax revenue fell 9% to $369 billion.

Tariff revenue dropped approximately 39% year-on-year to $19.2 billion.

Higher military spending, healthcare costs and interest payments on national debt contributed to the increase in expenditure.

Tax receipts were weighed down by lower tariff collections and corporate tax refunds.

The Treasury projects the fiscal deficit for FY2027 could rise slightly to approximately $2.2 trillion.

The US recorded a deficit of $1.99 trillion in the previous fiscal year, equivalent to around 6% of GDP.

Key takeaway: The sharp increase in October's deficit highlights mounting pressure from government spending and debt-servicing costs, alongside weaker revenue collections. A projected $2.2 trillion deficit would keep US fiscal sustainability in focus.