According to a study by the German Economic Institute (IW), US President Trump's economic agenda has driven solid economic growth and strong investment, but has failed to reduce the trade deficit.
The Trump administration has sought to reshape the US economic structure, reverse long-term trade imbalances, and reduce America's dependence on overseas supply chains through measures such as tax cuts, tariffs, attracting corporate investment, and promoting manufacturing reshoring. However, based on current economic performance, the actual effects of these policies remain clearly mixed.
The report notes that Trump's tax cuts, tariff measures, and efforts to bring manufacturing back to the United States have produced mixed results. US gross domestic product (GDP) has maintained solid growth, and artificial intelligence (AI)-related investment has been strong, but job creation has lagged behind the pace of the previous administration, and inflation remains above the Federal Reserve's 2% target.
The report also states that despite broad import tariffs, the US goods trade deficit still reached $130 billion in August, higher than two years ago. However, the trade landscape has changed. The European Union's share of the US trade deficit fell from 20% in August 2024 to 7%, while China's share dropped from 29% to 14%.
Efforts to promote manufacturing reshoring to the United States have so far failed to meet expectations. In 2025, foreign direct investment inflows into the United States fell 8.2% to $248 billion, 18% below the average level from 2015 to 2024.
In addition, the war launched by the United States and Israel against Iran is exacerbating America's already high public debt and pushing up interest rates. Creditors are beginning to question whether the United States can sustain its outstanding debt of up to $40 trillion.
Tariff Policy Reshapes Trade Patterns but Fails to Reverse Overall Trade Imbalance
Trump has made tariffs one of the core tools of his economic agenda, seeking to protect domestic industries, encourage companies to move production to the United States, and pressure trading partners to readjust their trade relationships with the US by raising the cost of imported goods. The policy approach is to use tariffs to increase the cost of overseas production and exports to the US, thereby strengthening the competitiveness of domestic manufacturing, while using access to the US market as a bargaining chip to push trading partners to make concessions.
Under this policy framework, the Trump administration has expanded the scope of tariff measures and linked tariffs with national security, supply chain security, and industrial policy. In addition to imposing tariff measures on different trading partners, the US government has also included strategic industries such as semiconductors among its key priorities, attempting to build production capacity for related industrial chains within the United States through import restrictions and tariff arrangements. For example, in January 2026, the Trump administration announced a 25% tariff on certain advanced computing chips and related products, while at the same time setting exemption arrangements for imports used in US data centers, research and development activities, and other products that help strengthen the domestic US technology supply chain. This policy reflects the US government's attempt to strike a balance between restricting certain imports, supporting domestic manufacturing capacity, and meeting the needs of the domestic technology industry.
However, tariff policy does not necessarily lead to a narrowing of the overall US trade deficit. On the one hand, companies may adjust supply chains and shift procurement and production to other countries rather than directly moving manufacturing back to the United States; on the other hand, the US still has substantial demand for overseas goods and intermediate products, especially in areas where domestic production capacity is not yet sufficient. Therefore, even if imports from a specific country or region decline, the US may shift to importing from other economies. The source of the trade deficit may change accordingly, but the overall scale may not necessarily decline in tandem.
At the same time, tariffs may also raise corporate procurement costs. For US manufacturers that rely on imported raw materials, components, and equipment, tariffs increase input costs. Companies may pass part of the cost on to consumers by raising product prices, or may compress profit margins or postpone investment plans. If companies cannot determine future tariff levels and the direction of trade policy, they may also delay long-term capital expenditure and supply chain adjustment decisions.
Despite broad import tariffs, the US goods trade deficit still reached $130 billion in August, higher than two years ago. However, the trade landscape has changed. The European Union's share of the US trade deficit fell from 20% in August 2024 to 7%, while China's share dropped from 29% to 14%. This shows that tariff measures have indeed changed the structure of US trade sources, but have not yet eliminated the overall US goods trade imbalance.
Manufacturing Reshoring Policy Continues but Investment Commitments Have Not Yet Fully Translated into Actual Capacity
Promoting manufacturing reshoring is another important pillar of Trump's economic agenda. The Trump administration believes that decades of globalization and industrial offshoring have weakened the US manufacturing base and left the United States overly dependent on overseas production in key products and supply chain links. Therefore, the government hopes to attract companies to build new factories in the United States, expand production scale, and move some production links originally located overseas back to the United States through means such as tariff protection, tax incentives, investment negotiations, and industrial support.
In terms of specific measures, the Trump administration, on the one hand, uses tariffs to raise the cost for companies producing overseas and then exporting to the United States, prompting companies to reassess their production layouts; on the other hand, it seeks more capital inflows into US manufacturing, technology, and infrastructure sectors by reaching investment arrangements with large multinational companies and foreign governments.
The semiconductor industry is one of the priorities of this strategy. The US government hopes to expand domestic chip manufacturing and related supply chain capacity with policy support and investment commitments. TSMC previously announced that it would invest up to $165 billion in the United States, covering projects such as chip manufacturing plants, advanced packaging facilities, and research and development centers. In addition, Apple also announced a plan to invest $600 billion in the United States over the next four years, one goal of which is to strengthen the domestic US silicon supply chain. General Electric pledged to invest about $3 billion to move part of its production layout from China and Mexico to the United States. These investment plans reflect that the US government is trying to rebuild the domestic manufacturing ecosystem through corporate capital expenditure and foreign direct investment.
However, there is a clear difference between investment commitments and actual capital inflows, factory construction, and newly added capacity. The investment scale announced by some companies may include previously announced projects, routine operating expenses, or long-term plans that have not yet been implemented, meaning that not all funds will be immediately invested within the United States. In addition, manufacturing projects usually take years from investment decision to factory completion and production. Companies must also comprehensively consider factors such as labor costs, energy supply, infrastructure conditions, raw material prices, and future policy stability. If tariff policies are adjusted frequently, companies may find it difficult to accurately assess long-term investment returns, and may instead postpone factory construction and expansion plans.
US manufacturing also faces real cost constraints. Compared with some overseas production bases, US labor costs are higher, while tariffs pushing up the prices of imported components and raw materials may also increase the cost of production within the United States. For companies that need to rely on global supply chains, tariff protection alone may not be enough to offset the cost disadvantage of domestic US production. Therefore, promoting manufacturing reshoring is not simply a matter of moving overseas factories back to the United States, but requires simultaneously building supporting supply chains, cultivating skilled labor, improving infrastructure, and ensuring that companies can obtain stable policy expectations over a longer period. Even if companies have already announced investment plans, new factories may not necessarily translate into obvious increases in employment growth and manufacturing output in the short term.
Efforts to promote manufacturing reshoring to the United States have so far failed to meet expectations. In 2025, foreign direct investment inflows into the United States fell 8.2% to $248 billion, 18% below the average level from 2015 to 2024. This means that although the Trump administration actively promotes large corporate investment commitments and tries to attract capital back through tariffs and policy incentives, actual foreign capital inflows have not grown in tandem.
Changes in Trade Structure and US Fiscal Pressure Further Test the Long-Term Effectiveness of the Economic Agenda
From a broader economic perspective, the Trump administration's policies also face complex relationships among trade structure, corporate investment, and fiscal conditions. The US goods trade deficit has long been affected by multiple factors, including domestic consumer demand, the savings and investment structure, the dollar exchange rate, and the global supply chain division of labor. Tariffs can change the prices and sources of imported goods, but it is difficult for them alone to resolve the deep-seated factors that determine the overall trade imbalance.
At the same time, there is also a certain policy tension between tariff policy and manufacturing reshoring policy. The government hopes to encourage companies to produce in the United States by raising import costs, but if the prices of imported components, equipment, and raw materials rise at the same time, the cost for companies to build domestic factories may also increase accordingly. Coupled with uncertainty over policy adjustments, some companies may choose to shift production to other low-cost countries rather than directly moving it back to the United States.
The war launched by the United States and Israel against Iran is exacerbating America's already high public debt and pushing up interest rates. Creditors are beginning to question whether the United States can sustain its outstanding debt of up to $40 trillion. Higher interest rates mean that the US government may face higher interest expenses when financing new debt and refinancing existing debt. At the same time, corporate financing costs and household borrowing costs may also be affected, thereby putting pressure on manufacturing investment, the real estate market, and consumer demand. If the fiscal deficit continues to expand, market concerns about the sustainability of US debt may further affect Treasury yields and financial market risk pricing.
Overall, the Trump administration is trying to use tariffs, tax cuts, and manufacturing reshoring policies to shift the US economy from reliance on global supply chains toward greater emphasis on domestic production and industrial security. At this stage, these policies have already affected the structure of US trade sources and corporate investment layouts, and AI-related investment has also provided support for economic growth. However, the trade deficit remains high, foreign investment inflows have declined, manufacturing reshoring has not yet fully translated into new capacity and employment, and high public debt and interest rate pressure have increased macroeconomic uncertainty. This means that evaluating the actual effectiveness of Trump's economic agenda cannot rely only on the scale of tariffs or corporate investment commitments; it also requires observing whether US manufacturing employment, actual capital expenditure, industrial output, foreign investment inflows, and the overall trade deficit can continue to improve. Whether the above indicators can show substantive changes in the future will determine whether the Trump administration's policy goals of promoting a US manufacturing revival and reshaping the trade landscape can truly be achieved.
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