The U.S. trade deficit in goods reached a new record last year, despite Donald Trump’s continued efforts to reduce the number, which he sees as a sign of the country’s economic weakness.
Data released Thursday morning by the Commerce Department indicated that despite all the tariffs-related disruptions and volatility, the trade deficit in goods hit $1.24 trillion in 2025, up 2% from 2024, as Americans kept buying imported products. Both the U.S. imports and exports in goods and services hit new records last year, reaching $4.3 and $3.4 trillion, respectively. The overall trade deficit decreased 0.2%, to $901.5 billion.
“It’s fair to say that Trump is losing his war on tariffs,” said Ed Gresser, the Vice President and Director for Trade and Global Markets at Progressive Policy Institute.
Since returning to office, Donald Trump has repeatedly said his policies would cut the trade deficit and boost U.S. manufacturing, creating more jobs. Last year, in pursuit of these goals, he raised tariffs on many imports, increasing the average rate from 2.6% to 13%. Instead, the tariffs redirected trade flows rather than reducing U.S. reliance on imports, most notably exemplified by the rerouting of Chinese imports.
“The data is certainly antithetical to the administration’s stated goals of shrinking the deficit,” said Abigail Hall, associate professor of economics at the University of Tampa.
On January 20, Trump said that the U.S., which has been running consistent trade deficits since 1976, “won’t have a trade deficit” in 2026. Brian Bethune, an economics professor at Boston College, estimates the likelihood at about 1%.
One tangible effect of Trump’s tariffs is the remarkable fall in China’s share of U.S. imports last year. China, which was America’s top source of imports from 2007 to 2023, peaking at 22% in 2017, is now back at early-2000s levels, with a 9% share.
But the drop doesn’t necessarily mean that the U.S. has broken away from Chinese supply chains. “Essentially, we see a shift in the assembly of consumer goods from China to neighboring countries: Vietnam, Philippines, Taiwan, India,” said Gresser.
The most important question is who pays for the tariffs. “Some people look at the data and say: ‘Hey, we’re reducing our reliance on China’, but that doesn’t tell the full story,” said Hall. “When you start to dig below those sexy headline numbers, you find a much less rosy picture.”
In fact, a report issued by the New York Fed found that nearly 90% of the tariffs’ economic burden fell on U.S. firms and consumers. “In the end, the cost of the stated goal of protecting U.S. jobs is far outstripped by the cost of goods now paid by the American consumer,” said Hall.
As the U.S. trade balance might soon see even more fluctuations—on February 20, the Supreme Court ruled that Trump’s sweeping tariffs violated the law—economists agree that it’s hard to make predictions for 2026.
“The biggest problem with this capricious administration is that you never know what they’re going to say or do next,” said Bethune. “But unless the president intends to really break the growth of the economy in some way, shape or form, the trade deficit is here to stay.”