Trump's Tariffs Were Supposed To Cut the Trade Deficit and Boost U.S. Manufacturing. They're Not Working.
For Trump, tariffs are a solution to every problem, and his trade war is more about the vibes than the economics.
How should we assess whether President Donald Trump's tariffs have been effective?
It's an important question—yet frustratingly difficult to answer. Trump has outlined overlapping, confusing, and sometimes competing goals for the tariffs.
He's celebrated them as a source of government revenue, for example, but also claimed they are meant as a negotiating tactic. They can't be both. Tariffs used for negotiation are meant to be removed (once negotiations are complete), rendering them useless for long-term revenue. For Trump, tariffs are a solution to every problem, and the trade war is more about the vibes than the economics.
Thankfully, U.S. Trade Representative Jamieson Greer offered some more objectively measurable goals during an April 2025 hearing with the House Ways and Means Committee. When Rep. Brendan Boyle (D–Pa.) pressed Greer on what success would look like, Greer offered two clear metrics in response.
"The [trade] deficit needs to go in the right direction," Greer said. "Manufacturing as a share of [gross domestic product] needs to go in the right direction."
More than six months later, neither goal is any closer to being achieved. More importantly, neither seems likely to be completed over the long term by an economic policy rooted in barriers to trade.
Start with the trade deficit—the difference between the total value of all imports and exports. Trump has been obsessed with the trade deficit for years (though he tends to confuse it with the federal government's budget deficit—the gap between spending and tax revenue).
From January through July 2025, America's trade deficit was $840 billion, about 23 percent larger than during the same months in 2024. (Data for August were due to be released in October but were delayed by the government shutdown.)
That increase partially reflects businesses' urgency to get goods into the country quickly in early 2025 before even higher tariffs on items from many countries were enacted in August. It also reflects a now well-established fact: Tariffs don't reduce trade deficits. During his first term, Trump raised various tariffs but the country's trade deficit climbed from about $481 billion in 2016 to $679 billion in 2020.
Tariffs are no better as a tool for boosting manufacturing. According to the Commerce Department's latest figures, manufacturing has contributed 9.4 percent of total GDP through August 2025, down from 9.8 percent in 2024.
Rather than being helped, the manufacturing sector is being crushed by tariffs, which are increasing the cost of raw materials and intermediate goods. Monthly surveys by the Institute for Supply Management show that overall manufacturing activity has declined for seven consecutive months through September. A separate survey conducted by the Dallas Federal Reserve in August 2025 found that just 2.1 percent of business owners believed the tariffs had a positive impact. "The effect is most widespread in manufacturing, where more than 70 percent of firms noted negative impacts," the survey reported.
Even if the tariffs weren't creating serious headwinds for manufacturers, Greer's focus on "manufacturing as a share of GDP" is a misguided way of looking at the economy. That metric assumes that the whole economy is a fixed size, which is not true. The share of GDP generated by manufacturing could increase during a recession if other sectors of the economy are declining by larger margins. For the same reasons, the manufacturing share of GDP could decline during strong economic times simply because other sectors are growing more rapidly. That's been the case for decades.
Some in Trump's orbit insist that 15 percent of the economy should be manufacturing, but that's an arbitrary target. And if the slice of the pie labeled "manufacturing" should grow, what sectors should shrink to make room for it?
During a speech in July, Greer added a third goal for the administration's tariff policies: increasing real median household income. It's too soon to know how that is shaking out—the Census Bureau won't release 2025 data on that stat until late 2026—but it is already clear that tariffs are making it more difficult for households to make ends meet. An October study from the Harvard Business School shows that retail prices had declined throughout 2024 and early 2025, then began rising in April, after Trump's tariffs were announced.
The Trump administration's tariff policies misunderstand the value of trade in a productive, flourishing economy. The administration has set the wrong goals and then made policy choices that are unlikely to achieve them.
This article originally appeared in print under the headline "Trump's Tariffs Fail Their Own Test."
