How is the US economy doing after Trump tariffs?

The June 2025 trade figures for imports and exports indicate that the imports have fallen substantially, and the exports inched up, and the resultant narrowing of trade deficit is to be seen as good news for the American economy. But the figures that are being highlighted are for a narrow period of time, and it has to be seen whether the trend will continue for a longer period.

The overall trade gap came down to 16 per cent in June to $60.2 billion. The trade deficit in goods went down to 10.8 per cent, the lowest since September 2023. American exports of goods and services stood at $277.3 billion, down from $278 billion in May. The imports fell to $337.5 billion in the month of June, consumer goods fell by $8.4 billion, industrial supplies and materials by $2.7 billion, auto and parts by $1.3 billion.

The reduced trade deficit is seen as a contributory factor to the rise in GDP. The economy has expanded by 3 per cent in the second quarter after contracting 0.5 per cent in the first. This looks like clutching at straws. The trade deficit with China came down to $9.5 billion, the lowest since 2004. Imports from China dropped to $18.9 billion, the lowest since 2009. China has been the main target of President Trump’s tariff fury.

The question remains as to whether by unleashing punitive tariffs against all the trade partners, has Trump strengthened the American economy? The jury is out on that issue. Inflation is slightly above the mandatory 2 per cent. People are feeling the pinch of inflation. Jobs have not grown. Trump realizes that there will be pain in the transition. He is promising that in the long term, his trade policy will make the American economy strong.

Trade deficit has certainly declined because imports into the country have gone down. Is it because the countries that export to America have held back because of the high tariffs, or the demand in the American markets has gone down because the Americans were not willing to buy the higher prices caused by the higher tariffs?

It looks like that both the United States and its major trading partners will have to adjust to the new conditions. Reducing trade deficit may be a good thing for a short period and range. If there is local demand, especially for the industries in terms of material inputs, then the American industries will suffer.

Similarly, if the import of consumer goods has fallen steeply, either the domestic producers should benefit in the long term, or the American consumers will have to cut back on their needs. It is not possible for American producers to meet the domestic consumer demand, and the tariffs make the imports costlier for the American consumer.

The consequences of high tariffs will play out gradually, and they cannot be seen immediately. The long-term effects of high tariffs are likely to be harmful than beneficial for international trade as well as domestic economies. There is no denying the fact that the tariff regime in the US has been liberal.

The fact that the US is the most indebted country and this is being traced to the low tariffs and the flood of imports. The connection looks plausible but it is not accurate.

The reason for American indebtedness is due to internal social and economic weaknesses. The limited educational levels of most Americans and the difficulty in employing them in frontier technology enterprises. The remedy for American problems does not exactly lie in high tariffs. It lies in the social sphere. And impromptu Trump solutions do not work.