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.
The reality is more complicated.
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.
The effect of tariffs
Despite a steady stock market, the US economy is showing signs of weakness.
While inflation slowed in November, Federal Reserve Chair Jerome Powell warned that the data may have been impacted by the government shutdown.
“Tariff measures are already exerting measurable upward pressure on consumer prices,” according to a report published in October by the Federal Reserve of St. Louis that looked at data from January to August of this year. “The rise in prices beginning in early 2025 coincides closely with tariff developments.”
On Tuesday, the Bureau of Labor Statistics reported that the country lost 105,000 jobs in October and added 64,000 jobs in November, while the unemployment rate rose to a four-year high of 4.6% in the past month.
In domestic manufacturing, the US Bureau of Labor Statistics reported 12,706,000 employees in the sector as of September 2025, down 49,000 from a base of 12,755,000 employees at the end of January 2025, when Trump took office.
Winegarden said that tariffs create an opportunity cost, because when more money is spent either by paying taxes on a foreign good or on a domestic product that is more expensive, that reduces the nation’s power to buy, invest, and hire.
“When you’re buying the least cost-efficient option, you’re subsidizing jobs that are less efficient, and sentiments aside, that’s bad for long-term job creation,” said Winegarden.
Jason Furman, professor of the practice of economic policy at the Harvard Kennedy School, also told Business Insider that the perception that tariffs have decreased trade deficits may be false to begin with, and they did not create any fiscal benefits for the nation.
“The trade deficit — it has not actually narrowed. There has just been a timing shift,” said Furman. “What happened was a lot of imports were pulled forward and ended up being unusually large in Dec 2024 through March 2025,”
According to the US Census Bureau’s International Trade in Goods and Services report, the national trade deficit was $95.2 billion larger in the first nine months of 2025 than in the same period in 2024.
“Tariffs are bringing in substantial revenue, but that revenue is largely offsetting other tax cuts done by the Trump administration,” said Furman.
“Moreover,” Furman added, “A meaningful portion of the tariff revenue is coming from American consumers in the form of higher prices.”
The White House did not immediately respond to a request for comment.
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