| Quarter/year | In dollars* | vs. GDP** |
| First quarter 2025: | $394 billion | 4.2% |
| Fourth quarter 2024: | $250 billion | 3.2% |
| Third quarter 2024: | $236 billion | 3.1% |
| Second quarter 2024: | $223 billion | 3.1% |
| First quarter 2024: | $205 billion | 3.1% |
* Census, May 2025 FT-900 release
** BEA, advance GDP estimate for the first quarter of 2025
In an exchange with Rep. Brendan Boyle (D-Pa.) at an April House Ways and Means Committee hearing (2:20:43), U.S. Trade Representative Jamieson Greer defines “success” for the Trump administration’s tariff decrees as follows:
“The deficit [i.e. trade balance] needs to go in the right direction. Manufacturing as a share of GDP needs to go in the right direction.”
Economics and daily life offer lots of reasons to object to this. “Manufacturing as a share of GDP,” for example, would fall during a factory boom if (say) homebuilding, digital tech firms, and retail sales grew even faster. Likewise, in a recession, the manufacturing share of GDP could rise even if Americans made many fewer cars, dental drills, harvesters, semiconductor chips, etc., so long as housing and finance crashed harder. Trade balances, meanwhile, can provide insights on the economy, but their relationship to economic trends is often perverse: deficits tend to rise during good years and fall in recessions. And most people likely see a lower cost of living, strong growth, and job opportunities as the main indications of successful policy, whether in trade specifically or economics in general.
But shelving these high-minded arguments for a minute, how do Ambassador Greer’s two indexes look so far?
We don’t yet know about the “manufacturing share of GDP” and won’t for a while. The Bureau of Economic Analysis does these estimates every three months. Their first 2025 “GDP by Industry” release doesn’t come out until June 26th, and it covers January to March; the first data for trends since the April 2 won’t be out until late September. For the trade balance, though, the initial numbers are drifting in, and they’re pretty unappealing.
Trade-balance numbers originate in data on cargo manifests, pipeline computers, air cargo package arrivals, etc. Customs and Border Protection officers dutifully convey them to Census statisticians who collate and analyze the raw data, add in estimates of service flows, and publish the numbers every month. Their most recent release — last Thursday’s “FT-900”, covering trade flows in March — suggests that the prospect of rising tariff rates, then the February/March tariff decrees, and the prospect of more in April, induced a rapid and massive deficit spike.
This release reports an overall U.S. March ‘trade deficit’ of $140.5 billion (for goods and services combined) — nearly double the $78.7 billion deficit of October 2024, and more than double the $68.5 billion in March 2024. Some monthly comparisons across “sectors”:
| March 2024 | October 2024 | March 2025 | Change 3/24-3/25 | |
| All goods and services trade | -$68.5 billion | -$73.7 billion | -$140.5 billion | +105% |
| All goods trade | -$93.5 billion | -$98.8 billion | -$163.5 billion | +65% |
| Manufacturing trade only | -$84.8 billion | -$118.8 billion | -$151.5 billion | +79% |
| Agricultural trade only | -$3.0 billion | -$2.5 billion | -$4.6 billion | +53% |
Alternatively, the broader goods-and-services figures drawn from BEA’s GDP estimates (and still subject to some revision) show quarterly “deficits” in a $200 to $250 billion range last year, or just under 3% of GDP. The first quarter of 2025 brought a sudden escalation to nearly $400 billion, or 4.2% of GDP. This is the highest GDP ratio BEA has found in 17 years, since the pre-crisis autumn of 2008.
The obvious questions: Why is this happening? How much credit do the administration’s tariff decrees get for it? Is the spike permanent? And if it is, what would the administration then do? A few thoughts:
1. Why? “Trade balance” is not an independent thing, but an arithmetical calculation: exports minus imports. The January-March deficit spike is entirely because the ‘import’ side of this calculation got a lot bigger while exports stayed about the same. The likely cause is that over these months, U.S.-based manufacturers, farmers, and construction firms were stockpiling as much metal, tools, fertilizer, paint, wiring, semiconductor chips, and other inputs as they could to save money before tariffs raised their costs, and retailers were doing the same for spring and summer inventory. So in an immediate sense, the Trump administration’s tariff decrees pretty certainly caused the spike.
2. Is it permanent? Census’ next report will likely still show some import-booming, but over the summer, imports will probably drop back. So all else equal, the deficit would be smaller later in the year. But by then two new factors will probably come into play, one pushing deficits down and the other pushing them up. They are:
(a) A recession would cut trade deficits: If the U.S. is in recession by July, Americans will buy fewer cars, houses, and consumer goods. Factory slowdowns and canceled construction projects will likewise cut imports of industrial goods. As in past recessions — 1991, 2001, 2008 — trade deficits would then likely drop. The administration might take solace in that, though the public probably wouldn’t.
(b) Deteriorating savings/investment balance will raise them: Meanwhile, though, the Trump administration’s domestic goals, if met, will lead to higher long-term trade deficits. The fundamental nature of trade balances is not ‘the incremental results of trade policy here and abroad’, in which balances by country are separate and unconnected data points. Rather, the trade balance is a core GDP ‘identity’: whether surplus or deficit, it will always equal any gap between national savings and national investment. If Congress’ potential tax cut is larger than the administration’s tariff increases, government “dissaving” — i.e. the fiscal deficit — will rise. Unless this is offset by some unexpected surge in family savings, or a collapse in business investment, the trade deficit will then grow rather than shrink. This is exactly what happened after the first Trump term’s combination of tariffs on steel, aluminum, and most Chinese-made goods with an income tax cut.
3. And so? The early data look awkward for the trade-balance measurement of success the administration’s senior officials favor. This is probably temporary, but the mix of tariffs and tax policy makes higher long-term deficits more likely than smaller ones. As to the “manufacturing share of GDP,” no particular reason for optimism there either. Since the first Trump administration’s tariffs on Chinese goods, steel, and aluminum in 2018, this share has fallen from 10.9% to 9.9% — either regardless of the tariffs, or in part because of them, given that they raised U.S. manufacturing costs. More of this is probably coming, given the Commerce Department’s apparent plans to make factory managers pay 25% more for basic manufacturing inputs including metals, semiconductor chips, and critical minerals, and the April 2 decree’s 10% tariffs on raw materials, wiring, paint, glass, light-bulbs, ceramics, etc. So there’s a high chance that the administration’s policy will drive both of its chosen “success” indicators — as well as better indicators such as the cost of living — in the “wrong” direction, not the “right” one. What does it then do?
PPI’s four principles for response to tariffs and economic isolationism:
Ambassador Greer at the hearing, with prepared text and full video. An exchange with Rep. Boyle on “success” as defined by trade balance and manufacturing GDP share at 2:20:43.
Data:
Census’ most recent monthly FT-900 trade release, with exports, imports, and balances generally, by product type, and by country.
… the FT-900 archives back to 1991.
… and a one-page summary of U.S. imports, exports, and trade balances from 1960 to 2024.
The Bureau of Economic Analysis’ data on quarterly and annual GDP estimates, along with its GDP by Industry calculations, services trade, investment flows, and more.
Farm trade figures from USDA’s Global Agricultural Trade System.
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
