Part of the explanation, according to economists, external, is that Trump’s tariffs increased the international relative value of the US dollar (by automatically reducing demand for foreign currencies in international trade) and that this made the products of US exporters less competitive globally.
Another factor behind this failure to close the trade deficit is the fact that tariffs, in a globalised economy with multinational companies, can sometimes be bypassed.
For example, the Trump administration imposed 30% tariffs on Chinese imported solar panels in 2018.
The US Commerce Department presented evidence in 2023, external that Chinese solar panel manufacturers had shifted their assembly operations to countries such as Malaysia, Thailand, Cambodia and Vietnam and then sent the finished products to the US from those countries, effectively evading the tariffs.
There are some economists who support Trump’s tariff plans as a way to boost US industry, such as Jeff Ferry of the Coalition for A Prosperous America, a domestic lobby group, but they are a small minority of the profession.
Oren Cass, the director of the conservative think tank American Compass, has argued tariffs can, external incentivise firms to keep more of their manufacturing operations in America, which he argues has national defence and supply chain security benefits.
And the Biden/Harris administration, while sharply criticising Trump’s proposed extension of tariffs, has kept in place many of the ones he implemented after 2018.
It has also imposed new tariffs on imports of things like electric vehicles from China, justifying them on the grounds of national security, US industrial policy and unfair domestic subsidies from Beijing.
