Trump tariffs fail to cut US trade deficit, IW study shows
A German Economic Institute study reports that Donald Trump's economic policies produced solid growth and AI investment but failed to reduce the US goods trade deficit, which reached US$130 billion in August. Trade patterns shifted away from China and the EU, while manufacturing revival lagged and f
The United States President Donald Trump's economic agenda has delivered robust growth and strong investment but failed to reduce the trade deficit, according to a study by the German Economic Institute IW seen by Reuters on Friday.
The report said Trump's tax cuts, tariffs and drive to revive domestic manufacturing had produced mixed results. Gross domestic product growth remained solid and artificial-intelligence-related investment was buoyant, but job creation lagged the prior administration and inflation remained above the Federal Reserve's 2 per cent target.
The US goods trade deficit reached US$130 billion in August, exceeding its level two years earlier, despite sweeping import tariffs. Trade patterns had shifted, however. The European Union's share of the deficit fell to 7 per cent from 20 per cent in August 2024. China's share of the trade deficit declined to 14 per cent from 29 per cent.
Efforts to bring manufacturing back have so far fallen short. Foreign direct investment inflows fell 8.2 per cent to US$248 billion in 2025, 18 per cent below the 2015–2024 average.
The US-Israeli war against Iran is increasing already high public debt and pushing up interest rates, with creditors questioning whether the US can sustain its outstanding debt of US$40 trillion, according to the IW report.