President Trump's tariffs have not decreased US trade deficits, German study shows

The US-Israeli war against Iran is increasing already high public debt and pushing up interest rates, with creditors questioning whether the US can sustain its outstanding debt of $40 trillion.

United States President Donald Trump's economic agenda has delivered robust growth and strong investment but failed to reduce the trade deficit, according to a study by the German Economic Institute IW seen by Reuters on Friday.

Trump's tax cuts, tariffs and drive to revive domestic manufacturing had produced mixed results. Gross domestic product growth remained solid and AI-related investment was buoyant, but job creation lagged the prior administration and inflation remained above the Federal Reserve's 2% target.

The US goods trade deficit reached $130 billion in August, exceeding its level two years earlier, despite sweeping import tariffs.

Trade patterns had shifted, however. The European Union's share of the deficit fell to 7% from 20% in August 2024. China's share of the trade deficit declined to 14% from 29%.

Foreign investment inflows to the US have fallen significantly

Efforts to bring manufacturing back have so far fallen short. Foreign direct investment inflows fell 8.2% to $248 billion in 2025, 18% below the 2015–2024 average.

The US-Israeli war against Iran is increasing already high public debt and pushing up interest rates, with creditors questioning whether the US can sustain its outstanding debt of $40 trillion.