US Trade Deficit Hits $130 Billion in August Despite Trump Tariffs, IW Study Finds

President Donald Trump's tariffs and tax cuts have failed to reduce the U.S. trade deficit, which reached $130 billion in August and exceeded its level two years earlier, according to a German Economic Institute (IW) study seen by Reuters on Friday. The report found Trump's agenda produced mixed results: GDP growth remained solid and AI-related investment was buoyant, but job creation lagged the prior administration and inflation stayed above the Federal Reserve's 2% target. Trade patterns shifted nonetheless, with the European Union's share of the deficit falling to 7% from 20% in August 2024, and China's declining to 14% from 29%. Efforts to reshore manufacturing have fallen short. Foreign direct investment inflows dropped 8.2% to $248 billion in 2025, 18% below the 2015–2024 average. The report also said the U.S.-Israeli war against Iran is increasing already high public debt and pushing up interest rates, with creditors questioning whether the U.S. can sustain its $40 trillion in outstanding debt.