Trump Tariffs Have Not Cut the U.S. Trade Deficit, German Institute Study Finds
A study by the German Economic Institute IW, seen by Reuters, says President Donald Trump's tariffs and tax cuts produced mixed results and did not reduce the trade deficit, which reached $130 billion in goods in August.
President Donald Trump’s tariffs and tax cuts have produced mixed results for the United States economy, and they have not reduced the trade deficit, according to a study by the German Economic Institute IW that Reuters saw on Friday.
The study says gross domestic product growth stayed solid and investment tied to artificial intelligence stayed buoyant, while job creation lagged the prior administration and inflation stayed above the Federal Reserve’s 2% target.
The trade numbers are the study’s central finding. The U.S. goods trade deficit reached $130 billion in August, above its level two years earlier, even after sweeping import tariffs, the study says.
Trade patterns shifted
Trade patterns did change, according to the study. The European Union’s share of the deficit fell to 7% in August from 20% in August 2024. China’s share fell to 14% from 29% over the same period.
Manufacturing and debt
Efforts to bring manufacturing back have fallen short so far, the study says. Foreign direct investment inflows fell 8.2% to $248 billion in 2025, which the study puts 18% below the average for 2015 to 2024.
The study also links the U.S.-Israeli war against Iran to higher public debt and higher interest rates. It says creditors are questioning whether the United States can sustain its outstanding debt of $40 trillion.
Reporting based on coverage by Reuters.
