Trump's Liberation Day tariffs help US reduce trade deficit with countries

But the February Supreme Court reversal of his decision has put future gains in doubt

On April 2 last year, President Donald Trump announced sweeping import duties on trading partners to match the reciprocal tariffs they levied on American goods. Trump argued the duties would reduce the “large” and “persistent” merchandise trade deficit the United States had with other economies, framing his announcement as Liberation Day.

 

On that front, the tariffs have helped the US. During Trump’s first tenure as President (2017-21), the average goods trade deficit the US had was nearly $800 billion. Thereafter, during Joe Biden’s term (2021-25), the average trade deficit shot up by 33 per cent. Trade deficit reached a mammoth $1.23 trillion in 2024-25 (April-February).

 

Trump’s tariffs helped reduce the trade deficit by 23 per cent year-on-year (y-o-y) in 2025-26 (April-February). Though the deficit reached $944.34 billion and is the lowest since 2021-22, it is above the pre-pandemic numbers.

 

The US has reduced trade deficits with leading trading partners. Its largest trade deficit was with China, of more than $287 billion, in 2024-25 (April-February). This dropped by 46.12 per cent y-o-y to nearly $155 billion in 2025-26. The deficit with Canada came down by 46.32 per cent. The US enjoyed a trade surplus of $29.67 billion with Switzerland in 2025-26 (April-February), after a deficit of $75.4 billion a year ago.

 

With India, the US’s trade deficit grew by 7.65 per cent to reach $47.49 billion in 2025-26 (April-February). Further, the US’s trade deficit with Mexico, Vietnam and Taiwan rose by 9.46 per cent, 45.29 per cent, and 110.92 per cent, respectively. Trade surplus with the United Kingdom surged by nearly 260 per cent.

 

The US’s revenues from Customs duties nearly quadrupled from $82.92 billion in 2024-25 (April-March) to $318.17 billion in 2025-26 (April-March). Before Trump increased tariffs in April 2025, the average share of revenue from Customs duties in the US government’s total monthly receipts hovered around 1-3 per cent, with minuscule aberrations. However, since April 2025, the share has been around 5-9 per cent.