German Study Finds Trump Tariffs Failed to Cut Trade Deficit
The German Economic Institute IW reports that President Donald Trump's tariffs and tax cuts failed to reduce the U.S. trade deficit despite shifts in partner shares.
A study by the German Economic Institute IW indicates that the economic policies of President Donald Trump, specifically sweeping import tariffs and tax cuts, failed to reduce the United States trade deficit. The U.S. goods trade deficit reached $130 billion in August, exceeding levels recorded two years earlier.
While the share of the deficit attributed to China fell from 29% to 14% and the European Union's share dropped from 20% to 7%, the report concludes that efforts to revive domestic manufacturing saw limited success. Foreign direct investment inflows decreased 8.2% to $248 billion in 2025, an 18% decline compared to the 2015–2024 average.
The institute noted that GDP growth and AI-related investment remained strong, but job creation lagged behind the previous administration and inflation remained above the 2% target set by the Federal Reserve System. Additionally, the U.S. war against Iran has increased public debt to $40 trillion, triggering higher interest rates and concerns among creditors regarding fiscal sustainability.
