* Unadjusted deficit in July was highest monthly gap since

March 2021

* Deficit of $1.8 trillion for first 10 months of fiscal

2026 exceeds entire deficit of prior fiscal year

* Customs receipts were negative for third month in a row

By David Lawder

Aug 12 (Reuters) - The U.S. federal budget deficit for July

jumped to $432 billion, a record for the month, as higher

outlays and more negative tariff revenues also brought the 2026

fiscal-year-to-date budget gap to $1.799 trillion, topping the

full fiscal 2025 deficit with two months left in the fiscal

year, the U.S. Treasury said on Wednesday.

Last month's budget gap, which was partly inflated by calendar

shifts in benefit payments, was $141 billion, or 48%, higher

than in July 2025 and was the largest monthly deficit since

March 2021, when it hit $660 billion due to COVID-19 relief

program spending.

There have been only two other higher monthly deficits: $864

billion in June 2020 and $738 billion in April 2020, as the

pandemic-driven economic shutdown shattered tax receipts.

A Treasury official said unadjusted outlays for July were also a

record for that month at $766 billion, up $137 billion, or 22%,

from a year ago. But the month's outlays were inflated by $99

billion due to the payment in July of many August 2026 benefits

because the current month started on a weekend.

Accounting for these and other calendar shifts brought the

adjusted July deficit to $333 billion, up $50 billion, or 18%,

from the prior year, the Treasury said.

Unadjusted July receipts were down $4 billion, or 1%, to $334

billion. That figure included an outflow of $8.55 billion in net

customs receipts after tariff refunds totaling $33.38 billion

for the month, marking the third straight month of tariff

outflows.

The refund total, driven by the U.S. Supreme Court's decision

to strike down the broad emergency tariffs imposed by President

Donald Trump last year, was down somewhat from the $49.2 billion

in refunds issued in June.

The U.S. Customs and Border Protection agency said in a court

filing last week that it had processed about $100 billion in

refunds through the end of July. It initially said that about

$166 billion was collected from the now-illegal duties.

But the Trump administration continues to rebuild its tariffs

under other legal avenues, last month imposing duties of 10% or

12.5% on 60 major trading partners covering more than 99% of

U.S. imports over lax enforcement of forced labor curbs. More

tariff orders are expected in the coming weeks.

The nonpartisan Congressional Budget Office now estimates that

full-year customs duties collections will be about $250 billion

lower than its initial projections in February, diminishing what

had been seen as an increasingly important revenue source.

FISCAL 2025 DEFICIT EXCEEDED

Tariff revenue last year helped drive a slight reduction in the

2025 fiscal-year deficit to $1.775 trillion. But the deficit for

the first 10 months of the 2026 fiscal year has already exceeded

that of the entire 2025 fiscal year, with an unadjusted gap

totaling $1.799 trillion. The current fiscal year ends on

September 30.

The year-to-date deficit was up $170 billion, or 10%, from the

$1.629 trillion reported for the year-ago period. But including

calendar shifts, the Treasury said the adjusted fiscal

year-to-date deficit would have been $1.700 trillion, up $79

billion, or 5%, from the year-ago period.