America refused to wean itself off buying goodies from abroad last year, even as bringing products into the country got more expensive. The government said yesterday that the US trade deficit—calculated as imports minus exports—declined a mere 0.2% in 2025 from the previous year, to $901.5 billion, despite President Trump jacking up tariffs.
Trump pitched his sweeping import duties as a way to reduce America’s reliance on foreign goods and get US companies to source stuff at home instead—but the trade deficit for physical products, adjusted for inflation, actually grew by almost 6% last year. Economists say this could have been partially caused by companies going on a shopping spree to stockpile imported inventory ahead of the tariffs going into full effect.
Deficit shifted, not shrank
While seemingly not moving the needle on total imports, the tariffs did appear to impact where the US was buying from:
- The deficit with China declined, while it rose with other trade partners, such as Taiwan, Mexico, and Vietnam.
- It’s a sign that companies reacted to the US–China trade war by seeking alternative origins for imports, though experts caution it might also mean that Chinese goods are being routed through other countries to avoid steep duties.
Feeling the bite
Despite trade flows barely budging, corporate coffers are feeling a deficit. US companies and consumers shouldered 90% of the tariff costs, according to a recent study by the New York Federal Reserve. Trump’s top economic advisor, Kevin Hassett, excoriated the central bank’s researchers, saying they ignored rising wages due to reshored production.
But, yesterday, JPMorgan echoed the New York Fed’s findings with a report showing that midsize US companies saw their tariff expenses triple in 2025. While importers may have absorbed some of those costs (potentially by hiring fewer workers, or taking reduced profits), research suggests US consumers are shouldering some of the tariff burden.
Whether the tariffs continue is up in the air…as the Supreme Court returns from its winter recess and could rule on the legality of many of Trump’s tariffs as early as today.—SK
Comments