Trump's Tariff Policy Fails, More Pain for Economy Ahead

The Trump administration is set to impose fresh import tariffs on dozens of countries and a 50% tariff on many Canadian goods, despite the failure of its earlier tariff policy to achieve its objectives.

Eighteen months into his second term, the policy has failed to narrow the trade deficit or increase manufacturing employment. In fact, the trade deficit on goods and services remained virtually unchanged from the previous year's level of $900 billion in 2025, while in the first half of this year it was still running at an annual rate of $700 billion.

According to economists, a country can't simply impose high tariffs to eliminate its trade deficit. The deficit is a result of spending more on consumption and investment than producing domestically. The US's large trade deficit is caused by its irresponsible budget deficit policy, which drains the country's savings level and keeps spending above productive capacity.

The Congressional Budget Office estimates that Trump's budget policy will result in budget deficits of over 6% of GDP for as far as the eye can see. If the administration were serious about reducing the trade deficit, it would take corrective public spending and revenue-enhancing measures to bring the budget deficit under control.