America’s Trade Deficit Is Dropping Thanks To Trump’s Tariffs. Will That Improve The Economy?

The Trump administration did a victory lap on Wednesday as new data shows America’s trade deficit with foreign countries plummeting, but multiple economists told The Daily Wire that reducing the trade deficit does nothing to move the U.S. economy in the right direction.

A new report from the Commerce Department showed that the U.S. trade deficit decreased by 24% in August as the president’s tariffs hit countries around the globe. The White House highlighted the new trade data and said it is “more proof that President Trump’s trade and economic agenda continues to pay off for the American people.”

“As the President’s historic trade deals and pro-growth policies continue to take effect and trillions in investments to make and hire in America continue to materialize, Americans can rest assured that the best is yet to come,” White House spokesman Kush Desai said in a statement shared with The Daily Wire.

A trade deficit occurs when a country’s imports — the products it brings into the country from other nations — exceed its exports — what it ships to other countries to be sold in their markets. Trump has argued that the United States has been unfairly treated by its trading partners, partially due to “large and persistent annual U.S. goods trade deficits.”

The data, released by the Commerce Department’s Bureau of Economic Analysis and Census Bureau, shows that as Trump’s tariffs took hold, U.S. imports decreased 5.1%, while exports remained flat. For comparison, U.S. imports rose in July while many of the president’s tariffs were still in limbo, suggesting that American companies were stocking up on products before the tariffs went into effect. Now, companies are importing fewer products and machinery as they seek to avoid paying high tariffs for their goods, which could be a concerning sign about the future of the U.S. economy, according to Colin Grabow, associate director of the Center for Trade Policy Studies at the libertarian Cato Institute.

“It was reported that the decline in the trade deficit was more specifically due to U.S. firms reducing their purchases of machinery, industrial supplies, pharmaceutical ingredients, and telecom equipment, and this really speaks to the misplaced obsession some people have with trying to reduce imports or thinking that reduction is a good thing,” Grabow said. “These are all imports used in the production of stuff. We take foreign machinery and we put it in American factories and we make stuff. Well, if we’re importing less of that, it tells me we’re going to be producing less stuff.”

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E.J. Antoni, the chief economist at the Heritage Foundation, said that while a deficit is usually a negative term when talking about money, a trade deficit can often be a good thing. Antoni argued that trade deficits driven by foreign investments are positive for the United States and have been the norm for most of American history.

“From even before our nation was founded, before the Revolutionary War all the way through the Gilded Age in the late 19th century, we ran a trade deficit in every single year except for seven years. And of those seven years, in four of them we were at war with Great Britain, so obviously they didn’t want to trade with us very much, and the other three were banking panics when Americans were basically so poor they couldn’t afford anything from abroad.”

Antoni explained that it’s more important for Americans to look at how and why the trade deficit is shifting, saying it’s better for a trade deficit to be driven up by foreign investments than for the deficit to come down because the United States sold off revenue-generating assets.

“When it comes to international trade, much of the assessment of whether things are good or bad for Americans comes down to not just the numbers themselves, but why the numbers are moving in one direction or another,” Antoni said. “Again, a trade deficit is not in and of itself bad. It’s a complete misnomer.”

Dr. Wayne Winegarden, senior fellow in economics at the free-market Pacific Research Institute, told The Daily Wire that he was confused by why the Trump administration was celebrating a decrease in the trade deficit.

“When we’re saying the trade deficit is smaller, we’re simultaneously saying the capital surplus is smaller.” Winegarden said.

“Over the last three months, exports have basically stagnated, we’re not selling any more overseas,” he added. “Imports are down, meaning consumers have less access to affordable goods and manufacturers have less access to the materials they need, so I’m trying to figure out how that’s a good thing.”