Trump administration tariffs are failing to achieve their goals

October 1, 2025
Ed Gresser

FACT: Trump administration tariffs are failing to achieve their goals.

THE NUMBERS: Manufacturing share of U.S. GDP:

2025 (Jan. – June)	9.4%
2024	9.8%

WHAT THEY MEAN:

What is the Trump administration trying to do? Rep. Brendan Boyle (D-Pa.)’s adept questioning of U.S. Trade Representative Jamieson Greer at April’s House Ways and Means Committee hearing (2:30:33) extracted a definition and two measurable goals:

“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.”

Amb. Greer’s two metrics have some pretty serious flaws as definitions of “success.” (See below in “Further Reading” for a brief critique.) But in contrast to vague administration slogans like “production society” and “new golden age,” they’re actual things official stats regularly measure. So, eight months since Mr. Trump’s tariff binge started, how do they look?

1. The manufacturing share of U.S. GDP is smaller: The Commerce Department’s Bureau of Economic Analysis does the official ‘GDP by Industry’ estimate. Its most recent release, out last Thursday, puts the manufacturing share of U.S. GDP at 9.4% this year, down from 9.8% in 2024.

2. The U.S. trade deficit is bigger (but volatile): The Census Bureau’s monthly tallies of U.S. trade flows show a goods-trade deficit of $840 billion so far this year (from January to July), 23% larger than the $682 billion they report for January-July 2024. Alternatively, (a) for manufacturing specifically, this year’s $800 billion deficit outdoes last year’s $655 billion, and (b) the larger goods/services balance at $654 billion is up about 30%n from last year’s $500 billion.

Cautionary note on trade balance, though: The higher 2025 deficit reflects in part a surge of imports in January, February, and March, as worried businesses pushed to get products in and pile up inventories before tariffs went up. Since May, deficits have dropped a bit. Census’ most recent monthly total was $103.9 billion in July, equal (with rounding) to the $104.4 billion in July 2024. This year’s total is pretty certain to be bigger than last year’s, and last July’s summer tax bill will probably push up trade deficits next year (again, see below). But there’s some room for uncertainty.

In sum: So, Amb. Greer’s metrics don’t look very good. In the months since his exchange with Rep. Boyle, both — especially the manufacturing/GDP share — have gone in a pretty clear direction. It’s not the one the administration probably expected or wanted. In common parlance, they seem to be going south.

Why would tariffs bring down the manufacturing share of GDP? Mainly because manufacturers buy lots of natural resources, capital goods like industrial machinery, inputs like paint and metal, and components and parts from brake-pads to semiconductor chips, light bulbs, and cloth. Taxing these things through the tariff system makes manufacturing here more expensive. Here’s an example, from an appeal filed to the Commerce Department in June by the National Aerosol Association (a trade group representing makers of whipped-cream canisters, perfume spritzers, etc):

“[B]oth the producers and the fillers of metal aerosol packages in the United States face increased prices for their key inputs as a result of the Section 232 tariffs, as tinplate steel, laminate steel, aluminum, and empty aerosol containers made from those metals are all subject to Section 232 tariffs. As a result, these U.S. industries are currently operating at a material disadvantage compared to foreign producers of empty and filled metal aerosol products, none of which face increased prices associated with Section 232 steel and aluminum tariffs.”

As PPI’s Gresser noted last week, the Commerce Department responded in August with a decree declaring that condensed milk and cream are made of metal. Perfume, windshield de-icing fluid, balance beams, propane, and much else too. In effect, the DoC’s solution is not to make “manufacturing in America” less expensive, but to make the relevant goods more expensive for families, too. The likely effect is that they’ll buy less.

And perspective:

Trade balance and the GDP share held by manufacturers can suggest things. But especially when taken alone, they aren’t very reliable gauges of trade policy success specifically, or economic health in general. Some background on both –

1. Manufacturing share of GDP: This is “the size of manufacturing relative to other parts of the economy,” not “how strong is the manufacturing sector.” This ratio could fall during a factory boom if other large parts of the economy — say homebuilding, the digital economy, retail sales – grew even faster. That in fact happened in the late 1990s. Likewise, the “manufacturing share of GDP” could rise in a terrible year, despite lots of factory closures and job loss, if housing and banks crashed even harder. This hasn’t happened recently, but 2009 and 2010 came close.

2. Trade balance: By economic math, the national trade balance equals the gap between national savings and national investment rates. Changes in these “macro” figures change the balance, and trade policy in the sense of agreements, rules, and tariff rates typically has little impact on them. The government’s largest influence on these figures is the fiscal deficit, which is part of the national savings rate. Deficits typically rise after large tax-cut bills — as in the early 1980s, the early 2000s, and the first Trump administration — and trade deficits typically follow it up.

Household savings and business investment levels are even stronger influences than government fiscal balance. Thus, trade deficits tend to rise in boom years (when investment booms and families spend) and fall in recessions (when investment crashes and consumers pull back). For example, in 2009 — this century’s worst year for the U.S. economy generally, for job loss, and for manufacturing specifically — the U.S. trade deficit fell by almost half, from $712 billion to $395 billion or from 5.0% to 2.9% of GDP. No one cheered.

What might be better definitions of success? The typical person would probably think economic policy in generally should try to bring down the cost of living, create growth, and provide more job opportunities, and trade policy should help. It takes work to sift out the effect of trade policy on these things from all the other things that go on in an economy, but that’s what academic economists, the U.S. International Trade Commission, etc., are for.