Trump's tariffs fail to cut US trade deficit, IW report shows
U.S. President Donald Trump's economic policies have spurred solid GDP expansion and vibrant artificial intelligence investment but failed to shrink America’s trade deficit, according to a German Economic Institute (IW) study seen by Reuters on Friday, which noted the goods trade gap widened to $130 billion in August despite sweeping import tariffs.
- Economy
- Reuters
- Published Date: 11:28 AM 30 October 2026
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.
Here are some key points from the report:
Trump's tax cuts, tariffs and drive to revive domestic manufacturing had produced mixed results. Gross domestic product growth remained solid and AI-related investment was buoyant, but job creation lagged the prior administration and inflation remained above the Federal Reserve's 2% target.
The U.S. goods trade deficit reached $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% from 20% in August 2024. China's share of the trade deficit declined to 14% from 29%.
Efforts to bring manufacturing back have so far fallen short. Foreign direct investment inflows fell 8.2% to $248 billion in 2025, 18% below the 2015–2024 average.
The U.S.-Israeli war against Iran is increasing already high public debt and pushing up interest rates, with creditors questioning whether the U.S. can sustain its outstanding debt of $40 trillion.