- Trump promotes reduced trade deficit and tariff revenue as economic successes.
- Economists told Business Insider that tariffs can raise consumer prices and may hurt job creation.
- Some economists argue that these indicators do not reflect overall US economic health or growth.
President Donald Trump is working to sell his economic policies. To convince the nation that the economy is improving ahead of the midterm elections, Trump is highlighting a reduced trade deficit and high tariff revenues as his key economic accomplishments since taking office.
Economists have told Business Insider that a smaller trade deficit and a record-breaking amount of tariff revenue can be poor indicators of overall economic health at best, and signs of economic trouble at worst.
“This idea that if we lower the trade deficit, we’re going to buy from US companies and we’re all better off — it’s seductive for people to think that way,” Wayne Winegarden, a senior fellow in business and economics at the Pacific Research Institute, a free-market think tank, told Business Insider. “But it’s just an incomplete view.”
‘”Unlike the budget deficit, the trade deficit is meaningless,” Winegarden added. “It has nothing to do with affordability, and it has nothing to do with growth, so it’s a complete red herring.”
The trade deficit
Trump is touring swing states, and he appeared on prime-time TV for a national economic address. “Remember when I said ‘tariff’ — my favorite word is ‘tariff,'” Trump told a crowd in Pennsylvania, “Tariffs are bringing us hundreds of billions of dollars.”
“We had the worst trade deals ever made, and our country was laughed at from all over the world, but they’re not laughing anymore,” Trump added in the national speech last week. The White House, in a December press release, also touted that “the trade deficit has narrowed to its smallest since mid-2020” in September, citing it as “more proof that President Donald J. Trump’s America First trade agenda is working.”
Kimberly Clausing, professor of tax law and policy at the UCLA School of Law and a previous official at the US Department of the Treasury, told Business Insider that despite the negative association with the word “deficit,” a smaller trade deficit could simply mean that people are pulling back on spending and investing overall. “In the United States in recent years, a declining trade deficit is often associated with a weak economy, due to reduced consumption and investment,” said Clausing. “That may be the case now as well, since some market indicators show economic weakness.”
According to the Bureau of Economic Analysis, the total volume of both exports and imports, adjusted for inflation, was in decline for three months preceding August.