A comprehensive new study by the German Economic Institute (IW) has concluded that U.S. President Donald Trump’s economic agenda has delivered solid economic growth and strong investment in some sectors but has failed to achieve one of its primary objectives: reducing the U.S. trade deficit.
Trump’s tax cuts, sweeping import tariffs and efforts to revive domestic manufacturing have produced mixed results.
Despite aggressive trade barriers, the U.S. goods trade deficit reached $130 billion in August, exceeding its level two years earlier.
Meanwhile, gross domestic product (GDP) growth remained solid, supported in part by buoyant investment in artificial intelligence (AI), although job creation lagged behind the previous administration’s performance and inflation remained above the Federal Reserve’s 2% target.
The administration’s manufacturing revival strategy has also fallen short of expectations. Rather than triggering a substantial reshoring of production, foreign direct investment (FDI) inflows declined by 8.2% to $248 billion in 2025, approximately 18% below the 2015–2024 average.
These figures suggest that efforts to attract foreign capital and rebuild domestic manufacturing capacity have yet to deliver the anticipated results.
While the overall trade deficit has persisted, its geographical composition has undergone a significant shift, pointing to a realignment of global supply chains rather than a reduction in the U.S. trade imbalance.
The European Union’s share of the deficit fell sharply from 20% to 7%, while China’s share declined from 29% to 14%, as imports increasingly shifted towards alternative trading partners and manufacturing hubs.
Meanwhile, mounting fiscal pressures are adding to the economic challenges. According to the IW report, expenditures associated with the U.S.-Israeli war against Iran are exacerbating an already substantial public debt burden, which has surpassed $40 trillion.
Rising borrowing requirements are putting upward pressure on interest rates and prompting growing concern among global creditors about the long-term sustainability of U.S. government debt.
Overall, the findings suggest that while Trump’s economic policies have supported growth and encouraged investment in certain sectors, they have yet to deliver on their central promises of narrowing the trade deficit, revitalizing domestic manufacturing and strengthening the country’s long-term economic position.
