German Institute: Trump's Economic Agenda Shows Mixed Results, with Trade Deficit and Manufacturing Reshoring Both Falling Short of Expectations
nashnova research
A study by Germany's IW institute finds Trump's economic agenda delivered on GDP growth and AI-related investment, but the trade deficit still hit $130 billion in August and FDI inflows fell 8.2% — the two core policy goals remain unmet, with fiscal and interest-rate pressures building.
After a full round of tariffs, did the trade deficit shrink?
The U.S. goods trade deficit reached $130 billion in August — higher than two years ago. This means → tariffs did not make America buy less from abroad; the overall gap actually widened.
The source of the deficit did shift: the EU's share fell from 20% to 7%, China's from 29% to 14%. In plain terms = the spending didn't drop — it just moved. The deficit migrated from China and the EU to other countries.
This reflects a structural reality: U.S. import demand is driven by consumption patterns. Raising tariffs on specific countries reshuffles trading partners but does not automatically shrink the total bill.
Manufacturing reshoring — big pledges, but has the money actually arrived?
U.S. foreign direct investment inflows fell 8.2% in 2025 to $248 billion — 18% below the 2015–2024 average.
TSMC pledged up to $165 billion, Apple pledged $600 billion over four years, and GE committed roughly $3 billion to move production back from China and Mexico. This means → corporations announced enormous figures on camera, yet actual foreign capital flowing in shrank.
In plain terms = an investment pledge is writing a check; building and operating a factory is cashing it. The gap between the two typically spans years, and any policy shift in between can hit the pause button.
Why do tariffs end up working against themselves?
The policy logic: raise import costs → push companies to build factories in the U.S. But imported components and raw materials get more expensive too → building in America costs more as well.
Some firms chose not to move back to the U.S. but to shift production to Vietnam, India, or other low-cost countries instead. This means → the deficit's country of origin rotated, but the total did not fall.
Frequent tariff adjustments compound the uncertainty. Companies cannot model long-term returns reliably, so they delay expansion — this reflects an inherent tension between the policy tool and the policy goal.
Jobs and inflation — what else is lagging on the scorecard?
The report notes that job creation trails the pace set under the previous administration.
Inflation remains above the Fed's 2% target. In plain terms = prices have not returned to what the central bank considers healthy, and consumers are still paying more for everyday expenses.
How does fiscal pressure reach ordinary people?
Outstanding U.S. public debt stands at roughly $40 trillion, and the military campaign against Iran is pushing spending higher. Creditors are beginning to question America's ability to service that debt.
Higher interest rates mean → the government pays more to issue new debt and refinance existing debt, squeezing the room left for other spending.
In plain terms = rising rates are not just a government balance-sheet problem — mortgage rates, auto loans, and corporate borrowing costs all climb in tandem, putting pressure on manufacturing investment and consumer demand at the same time.
How do we judge whether this policy agenda is actually working?
The report concludes: tariff size and corporate investment pledges alone are not the right yardstick. The real test is whether manufacturing employment, actual capital expenditure, industrial output, FDI inflows, and the overall trade deficit show sustained improvement.
This means → the data picture right now reads "big promises, slow delivery, side effects already showing." Whether the policy goals ultimately materialize requires a longer observation window.
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