It has been 10 months since President Donald Trump’s “Liberation Day” import tariff announcement in April. Ultimately, that announcement led to U.S. import tariffs rising to an average of 17%, their highest level in 100 years.
It is still too early to draw conclusions as to the overall damage those tariffs might inflict on the economy. However, it is not too early to see that those tariffs are failing to meet the basic objectives of narrowing the trade deficit, increasing manufacturing output and employees, and securing for the United States a more level international trade playing field.
Start with the trade deficit. For years, Trump has argued that the trade deficit is a national emergency that requires remedying through an aggressive import tariff policy. In his view, the trade deficit is a reflection of how foreigners have been ripping us off with their unfair trade practices and becoming wealthy at our expense. It is also a reflection of how foreigners have been stealing our manufacturing jobs.
Trump seems not to buy the alternative view that the trade deficit has afforded the U.S. the exorbitant privilege of being able to continually live beyond its means. Foreigners have done so by providing us with the wherewithal to spend more than we produce.
The numbers to date suggest that import tariffs are not succeeding in narrowing the trade deficit. Indeed, far from narrowing, the trade deficit in the first nine months of Trump’s second term widened by 14% relative to the comparable period a year earlier. This is reminiscent of the 40% increase in the trade deficit that occurred during Trump’s first term in office.