Trump has always been concerned about a lack of reciprocity with US trade partners, believing that is why the US has been having trade deficits. Last year, the US trade deficit in goods rose by 14%. The president wants to solve this problem by imposing tariffs. However, since he started imposing tariffs, the deficit has not changed.
The question now is, will the impact be seen in time?
Trump said that countries have to balance out their trade with the US before he would consider not putting those tariffs in place. The president said, “We have deficits with almost every country – not every country, but almost – and we’re going to change it.”
His reason is that the US has one of the world’s most open economies, yet its trading partners keep their markets closed to its exports. This lack of reciprocity is unfair and adds to its large and steady trade imbalance every year.
Experts take on the origins of the US trade deficits
President Trump has talked a lot about the US dollar’s role as the world’s reserve currency. He has also recently warned to impose tariffs on BRICS countries that try to take away that role. But the status of the dollar is a major cause of the trade deficit.
Scott Lincicome, VP of general economics at the Cato Institute, said, “Because the dollar is in demand abroad, that actually increases the dollar’s value… generally, a stronger dollar increases imports and decreases exports. […] So in that case, the trade deficit itself is a symptom of a good thing for the U.S. economy and something Trump likes.”
In the same light, Scott Lincicome said, “Trump imposed a ton of tariffs on steel and aluminum and on Chinese goods – and the U.S.-China bilateral trade balance did shrink a bit. But the overall U.S. trade deficit didn’t change, as a share of GDP, it was basically flat.”
He added that trade deficits with countries like Vietnam grew as the China trade deficit shrank.
Steven Kamin, a senior fellow at the American Enterprise, said that using tariffs to bring back industrial jobs is not likely to result in a large number of jobs returning to the United States.
He asserted, “A lot of the destruction of manufacturing jobs was caused by technological change, not by import competition.”
He added, “A lot of that basically hemorrhage of manufacturing jobs to very low-cost countries like China, like Mexico, was kind of inevitable. We were never going to keep those jobs, and more importantly, imposing tariffs at this point will bring some, but not very many jobs.”
According to Ryan Young, a senior economist at the Competitive Enterprise Institute, people buy goods and services from overseas because they value what they get more than the money they give up.
He asserted that trade balances don’t say anything about a country’s economic health, good or bad; it just means a lot of people are making beneficial decisions. He also pointed out that the United States has been running trade deficits for over 50 years.
Ryan Young said, “The U.S. has run a trade deficit every year since the 1970s, yet living standards are better by almost every measure, whether it’s income, unemployment rate, life expectancy, percentage of low-income households with air-conditioning, internet, and other goods, or nearly any other measure.”
He added, “If the trade deficit were harmful, much of what we see all around us every day should not exist. Trump gives a lot of reasons for his tariffs. Trade deficits should not be one of them.”
Countries that are not fair to the US
A 2019 research found that US exporters have to deal with higher taxes more than two-thirds of the time. This is when they go to 132 countries and sell more than 600,000 different types of goods.
Brazil is at the top of thelist. Apparently, only 2.5% of ethanol sold in the US is taxed, but Brazil puts an 18% tax on US ethanol exports. Because of this, the US bought more than $200 million worth of ethanol from Brazil in 2024 but only sent $52 million worth of ethanol to Brazil.
India has been one of the nations that Trump considers most unfair. His reason is that the average Most Favored Nation (MFN) tax that the US puts on agricultural goods is 5%. India’s MFN price, on the other hand, is 39% on average. A 100% tariff is also put on US bikes, but only a 2.4% tariff is put on Indian motorcycles.
In the EU’s case, the US can buy all the shellfish that the EU wants. However, the EU doesn’t let 48 of 50 US states ship shellfish, even though they promised in 2020 to speed up the approval process for shellfish exports. Because of this, the US bought $274 million worth of mussels from the EU in 2023 but only sent $38 million back.
A 10% tax is also put on cars that are brought into the EU. However, the US only charges a 2.5% tax.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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