Let’s discuss with eleven pictures.
US Balance of Trade Change 2019-2025
The numbers above are only through August, the latest available data. China has definitely improved.
It’s not clear if there are improvements elsewhere.
Projecting the current path forward is very likely wrong because it puts too much weight on tariff front running earlier in the year.
Brad Setser discusses this in a series of posts on X.
US Balance of Trade – Goods Only 10 Select Countries Plus EU 2024 and 2025
For reasons stated, it’s hard to make a case on what’s happening to non-full-year trade balances other than for China, Ireland, Taiwan, and India.
Only China shows a clear improvement. But some of the China improvement is a mirage of tariff avoidance through Vietnam, India, and Mexico.
Setser commented “Taiwan’s October exports (chips, data center infrastructure) went nuts.”
My chart shows Taiwan was already running ahead of 2024 despite only 8 months of data. India and Vietnam appear problematic as well.
Ireland is a special case. Nearly all imports from Ireland are pharmaceuticals. So, let’s subtract Ireland from the EU totals.
US Balance of Trade – Goods Only EU Excluding Ireland
If trump succeeded anywhere, the EU excluding Ireland is a good bet.
However, deficits from Taiwan, India, and Vietnam have probably gotten worse.
China rates to improve, and Trump will brag about the magnificent job he is doing, but most of the China improvement is tariff avoidance through Vietnam, India, and Mexico.
Add it all up, and I agree with Setser’s take: “So absent more data, I would say that the evidence suggests the non-pharma goods deficit has stabilized, but it isn’t yet falling.”
Tariff Q&A
Q: Are you saying all of these tariffs did little or nothing to reduce aggregate trade deficits?
A: Yes, that is what appears likely right now.
Related Tariff Posts
May 4, 2025: Movies Are Now a National Security Threat, 100 Percent Tariffs Announced
Hooray for Hollywood!
Yes, it really is that stupid.
May 26, 2025: What Accounts for Most of the US Trade Deficit with the EU?
The deficit is not as big as Trump says. And two huge chunks are easily fixable.
June 24, 2025: Weight Loss Drugs Help Blow Out the US Trade Deficit
Let’s discuss Ireland, weight loss drugs, and other trade distortions.
All of the deficit with Ireland is due to US pharmaceutical companies taking advantage Ireland’s low tax rate.
US tax policy, by the Trump administration, encourages overseas production.
Long ago I proposed the US adopt a corporate tax rate of 10 percent with 20 percent on foreign profits. Pharmaceutical and other production would return to the US pronto.
It is too early to say what the real impact of Trump’s tariffs will be on trade deficits and manufacturing. However, it is infuriating to me that trade discussions always seem to ignore services trade completely, given that the United States is the dominant nation in services. The evolution of capitalistic economies and societies over time, if not overly manipulated by politicians, will move from a manufacturing-dominated economy to a services-dominated economy. We are currently the most innovative and dominant provider of technology services, consulting, and education worldwide. So, why do we ignore entirely services when talking about trade balances?
Not sure who exactly the “we” is when you say “we ignore entirely services when talking about trade balances”.
When the US Census Bureau and BEA put out trade deficit figures, that includes both goods and services. But currently the amount of services the US trades is significantly smaller than the amount of goods it trades.
In August, the US had a services surplus with the rest of the world of $26B but had a goods deficit that month of $86B: https://www.bea.gov/news/2025/us-international-trade-goods-and-services-august-2025
So our goods ‘problem’ is 3-4 times bigger than our services ‘dominance’. Maybe that’s part of the reason “we” focus on goods more?
As of 2024, U.S. exports, broken down by goods and services, showed that services exports were just over $1 trillion and goods exports were just over $2 trillion. Looking at growth, services exports are growing significantly faster than goods exports. If this trend were allowed to continue, our overall trade deficits would shrink simply because services exports do not require imported parts, whereas many of our goods exports have corresponding imported components. It makes very little sense to ignore and abandon our strengths, which are services exports and free trade. TheTrump administration may actually realize that services are our strength. Still, its populist rhetoric must continue to focus on trade deficits in goods to justify its tariff gambit and placate its mostly non-college-educated base. I say that they likely realize that our competitive advantage lies in the knowledge-based services economy because they are facilitating an investment in AI-centric data centers and quantum computing that is over three times the investment the U.S. made in the Apollo space program in the 60’s and many times the investment in fiber and network computing in the late 90s in inflation-adjusted dollars. If you follow the money, the Trump administration is not investing in a rebirth of domestic manufacturing; it is investing in increasing our dominance in technology-related exports.
I recall several folks here saying that without US trade, China would suffer. Well the Chinese trade numbers are out. November exports to the US dropped $33.8 billion, so China is definitely selling less to the US.
But China’s overall trade with the world reached a record surplus of $1.08 trillion in the first 11 months of the year. Novembers trade surplus increased to $112 billion, in spite of the lower sales to the US.
China is still doing very well even though exports to the US have dropped to 10% of all exports. We are not hurting them very much.
Meanwhile, we are now bailing out our farmers because China is buying much less from them now.
I was just going to post this as China’s trade to the global south exploded as many nations are shunning US products due to our bullying and radical lack of coherent tariff policy.
China’s exports to the US fell 29% in November as China is actively decoupling from US trade and using a significant percentage of its surplus to buy gold.
Yep. Why should many countries bother trading with the US when we are putting tariffs on them, even if we already have a trade surplus with them. We are doing our best to isolate ourselves from the rest of the world.
And now Trump wants to put more tariffs on Canadian potash. Poor US farmers can’t catch a break.
Oh the horror of China dumping cheap goods at ultra low prices! Somebody please make it all stop and save us from low, low, low prices! We all want to pay top dollar for everything because everyone in America is so rich right now! /s
I guess the rest of the world is snapping up all that cheap China stuff, their quality of life improves while quality of life here declines, any questions?
The more the government controls the more our country will deteriorate, regardless of the leadership. Public sector control = crap. We mostly vote idiots into office that are controlled via special interests. I’m not saying your vote does not count but regardless of who you vote for expect negative results over the long term. Indirectly, we are voting for more government control and an accellerating socialistic society. Don’t listen to what they say and promise, just watch what they do or have done.
It’s not Socialistic, it’s Socialist.
Grammar police???
That wasn’t a grammar problem.
Then??? ….
“Socialistic” describes things related to socialism, an economic and political system focusing on collective or government ownership/control of production, aiming for equitable wealth distribution, strong social welfare (healthcare, education), and worker well-being, often contrasting with capitalism’s private ownership and market focus, with examples ranging from Nordic-style democracies to more state-controlled economies. It means advocating for or exhibiting socialist principles, like high taxes for public services or worker cooperatives.
Trump announced $12 billion in welfare for socialist farmers.
https://www.cnbc.com/2025/12/08/trump-farmer-aid-trade-tariffs-china.html
This stupidity sickens me to no end, gotta step away to go vomit in the toilet.
Sorry to block your path to the vomitorium, I gotta puke first!
Ok I’m empty and brushed my teeth…
The irony is that Trumps great deal yielded purchases of 12 million tons of soybeans in 2025 against sales of 27 million tons last year. Corn farmers have no where to store their corn because our storage facilities are full!
Trump is a disaster for farmers and sadly, they just do not get it!
As you drive through the countryside in the northern corn belt watch for fields that have gone unharvested because of full storage facilities.
ed seykota, the greatest trader of our generation sums the farmers actions by voting for trump. losers win by losing. they are a twisted group of humans. stuff happens in democracies over the past 3000 years. the farmers are winning. by losing.
I am sure it is a coincidence, but I read trade between Viet Nam and China is up 23%. Trade between Viet Nam and the US is also up 23%. Hmmmm.
The goal wasn’t rebalancing of trade. The goal was to seize more power.
In the end China will gain more power than ever. Trump has tried to take a cane to the back of the world and only managed to drive them to the open door of China.
Throughout history, nations cities and states with robust free trade have thrived while restrictive counterparts have contracted and fallen from importance. Centers of commerce and economic leadership tend to spawn new technologies, further investment and growth.
Failing governments come up with draconian tariffs that rarely work in the short run, and never in the long run. The nations governed by those tariff lovers loose their economic leadership.
Combine draconian tariffs and massive debt?
Boom Boom Cha Boom ~ Out Go The Lights
exactly correct.
All bond yields are up across the board today.
https://www.cnbc.com/bonds/
What’s going on? The 20 and 30 year are approaching 5 percent.
And why are banks pulling $75 billion from Fed repo in the last 30+ days?
The talking heads on CNBC are all giddy, acting like drug junkies about to get a hit from the Fed.
The Fed is being forced to cut rates and bend to Trump’s will. By the end of January, they will be kneeling. The Fed is going to be neutered eventually.
Well if they are being forced to cut rates to lower yields, it’s having the opposite effect across the board.
Bond market does what it wants to.
The Fed only controls short term rates <= 1 year. Longer term rates are controlled by the bond market (absent QE and operation twist). The market is predicting long-term inflation from Trump policies.
Higher tariffs affect the economic activity negatively and, consequentially, trade as well. If correct, the question is how to adjust the trade figures for decreased or decreased growth of trade.