IW Study Says Trump Tariffs Have Not Reduced U.S. Goods Trade Deficit
A German Economic Institute assessment says Trump’s tariffs changed who accounts for the U.S. trade gap but have not reduced the overall goods deficit.
President Donald Trump’s tariffs have changed the composition of the U.S. trade gap but have not reduced the overall goods deficit, according to an assessment by the German Economic Institute, known as IW, reported by Reuters on Friday, October 30. The institute described the administration’s broader economic record as mixed: growth and investment linked to artificial intelligence remained strong, while job creation and inflation presented weaker results.
The finding is an outside assessment of Trump’s policies, not a new government determination. Reuters said it had reviewed the IW report. A syndicated copy of the Reuters dispatch did not include a response from the White House, and the institute’s conclusions should not be read as proof that tariffs alone caused every change in trade, hiring or investment.
Goods deficit remains large
IW said the U.S. goods trade deficit was about $130 billion in August, above its level two years earlier despite broad import duties. The latest finalized government release uses a somewhat different figure: the Bureau of Economic Analysis and Census Bureau reported an August goods deficit of $136.6 billion and an overall goods-and-services deficit of $105.6 billion. The difference can reflect the data vintage and accounting measure used, but both figures show a large goods gap remained.
The official release also adds an important qualification. The goods-and-services deficit for January through August was down 19.9% from the same period in 2025, even as the three-month average deficit was higher than a year earlier. That mixed pattern is why a single monthly number cannot by itself establish whether the policy has succeeded or failed.
Trade shifted away from China and the European Union
According to the IW figures reported by Reuters, the European Union’s share of the goods deficit fell to 7% in August from 20% in August 2024. China’s share declined to 14% from 29%. Those changes suggest import sourcing and bilateral balances moved substantially, but the total gap persisted as trade shifted among partners.
Trump’s April 2025 reciprocal-tariff order said large and persistent goods deficits threatened U.S. economic and national security. The administration argued that higher duties would encourage domestic production, strengthen supply chains and create leverage against foreign trade barriers. The IW assessment tests that stated objective against later data and concludes that the aggregate deficit has not yet moved in the intended direction.
Manufacturing and investment results are also mixed
Reuters reported that IW found efforts to restore manufacturing had fallen short so far. The study put foreign direct investment inflows at $248 billion in 2025, down 8.2% and 18% below the 2015–2024 average. That measure should not be confused with the BEA’s separate preliminary series for spending to acquire, establish or expand U.S. businesses, which totaled $232.2 billion in 2025 and rose from 2024.
The institute also credited the economy with solid gross domestic product growth and buoyant AI-related investment. At the same time, it said job creation lagged the prior administration and inflation remained above the Federal Reserve’s 2% target. Those comparisons combine outcomes influenced by fiscal policy, monetary policy, energy prices, technology investment and global demand, not tariffs alone.
What the report establishes
The new development is the IW evaluation and its synthesis of trade, investment and economic data. It provides evidence that tariffs have altered bilateral trade patterns without yet eliminating the broad goods deficit. It does not settle the longer-term question: factories, supply chains and investment plans can take years to adjust, while tariff rates and exemptions may change through negotiations.
For now, the strongest supported conclusion is narrower than the headline political debate. Trump’s tariff program has produced visible changes in where the United States records its trade imbalance, but the available August data do not show that the overall goods deficit has been reduced from its level two years earlier.
Sources and image credit
- Reuters — IW assessment of Trump’s tariffs and the U.S. trade deficit
- The Standard — accessible syndication of the Reuters report
- U.S. Bureau of Economic Analysis and Census Bureau — August 2026 international trade release
- U.S. Bureau of Economic Analysis — preliminary 2025 new foreign direct investment statistics
- White House — April 2025 reciprocal-tariff executive order and stated policy rationale