US goods trade deficit climbed to $130 billion in August, exceeding levels recorded two years ago, as President Donald Trump’s tariffs failed to deliver a meaningful reduction in the trade gap, according to a study by Germany’s IW economic institute.
The economic agenda of US President Donald Trump has delivered solid economic growth and strong investment but failed to bring down the country’s trade deficit, according to a study by the German Economic Institute (IW) seen by Reuters on Friday.
Trump’s sweeping tariffs, tax cuts and push to revive domestic manufacturing have produced mixed results, with economic growth remaining robust and artificial intelligence-related investment staying strong. However, job creation has lagged behind levels recorded under the previous administration, while inflation remains above the Federal Reserve’s 2 per cent target.
The US goods trade deficit stood at $130 billion in August, exceeding the level recorded two years earlier, despite the Trump administration’s extensive import tariffs aimed at reducing dependence on foreign goods and boosting domestic manufacturing.
While the overall trade deficit has remained elevated, the composition of the US trade gap has undergone a significant shift. The European Union’s share of the deficit declined to 7 per cent in August, compared with 20 per cent in August 2024. China’s share also fell sharply to 14 per cent from 29 per cent over the same period.
The findings suggest that Trump’s tariff strategy has altered America’s trade relationships without delivering the broader objective of narrowing its trade deficit.
More from BusinessEfforts to revive domestic manufacturing have also fallen short of expectations. Foreign direct investment inflows into the US declined 8.2 per cent to $248 billion in 2025, standing 18 per cent below the average recorded between 2015 and 2024.
The report also flagged mounting concerns over America’s fiscal position. The US-Israeli war against Iran is adding to an already substantial public debt burden and pushing up borrowing costs, as investors and creditors increasingly question the sustainability of the country’s outstanding debt of around $40 trillion.
The findings highlight the challenges facing Trump’s economic strategy, as the administration attempts to balance protectionist trade policies, domestic industrial revival and economic growth against persistent trade imbalances and rising fiscal pressures.
