In charts: Why Donald Trump thinks the US is being ripped off

So far, much of the media coverage has focused on the US President's tariff agenda and the uncertainty created by his administration’s ever-changing announcements. An import tariff is a tax levied on imported goods, but Team Trump seems to view tariffs as a magic potion to make America great again.

It is useful, therefore, to understand why Trump thinks the US has been unfairly treated and how tariffs will set it right.

1. Trade deficit: too high

The US ran a trade deficit of $1.2 trillion in 2024. The deficits with China, Mexico, European Union, Vietnam and Japan alone add up to nearly 75% of the total. China is often pointed out as the main reason for US deficits; in fact, it did account for nearly half of the deficit in 2015. The first Trump regime (January 2017 to January 2021) imposed tariffs on a range of imports from China, and the Joe Biden administration that followed continued the tariffs.

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As a result, China’s contribution to the US trade deficit has shrunk since 2018. But other countries—notably Mexico and Vietnam—have increased their shares. The supplier base appears more diversified, but there are indications that Chinese imports are re-branding and entering the US via connector countries like Vietnam, in a clever rip-off. Naturally, the trade deficit continues to increase. The Trump team believes that tariffs will make imports costlier and push Americans towards producing and consuming domestic goods.

2. Manufacturing: too less

The US is ranked second in the world by manufacturing output, but it has lost its global manufacturing dominance to China over the last three decades. This has mainly hurt the American working class, which had come to rely on manufacturing jobs for steady incomes and lifetime employment. The number of manufacturing jobs in the US peaked at 19.6 million in 1979 and fell to 12.8 million by 2024. This hollowing out of manufacturing is partly the result of production bases shifting to low-cost countries such as China. Team Trump’s view is that the industrial capacities of emerging economies—especially China—were built unfairly because they were supported by state subsidies and protected by high tariffs.

Trump has also vowed to make American manufacturing great again. Specifically, import tariffs are being levied to revive domestic manufacturing in sectors that are considered by this administration important for national security, such as steel, aluminium, lumber, personal protective equipment (PPE), and semiconductors.

3. Dollar: too strong

The advantage of holding the world’s reserve currency is that there is no need to worry if forex reserves are enough to service international debt or to make import payments. The downside is that greater use of the dollar for cross-border transactions increases dollar demand and makes it stronger relative to other currencies. And in times of crisis such as the pandemic, war, or global inflation, the dollar becomes even more attractive as a safe haven.

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A strong dollar hurts the exporters in the US, who are already being priced out by lower-cost suppliers from developing countries. The dollar floats freely and is determined by market forces, whereas other countries can—and do—intervene to manage their currencies. The US President complains that other countries deliberately weaken their currencies to gain an export advantage; in fact, he recently told leaders of Japan and China that they were being unfair to the US by driving their currencies down.

4. Federal spending and debt: too high

The US government has run high budget deficits for years—it last had a surplus in the fiscal year ending September 2000, and its deficit was a whopping $1.83 trillion in fiscal 2024. Naturally, this resulted in the ballooning national debt ($35.5 trillion or 123% of gross domestic product in fiscal 2024).

The Department of Government Efficiency (Doge), led by Elon Musk, has been tasked with eliminating spending and reducing the size of government. To this end, federal grants have been slashed; and thousands of federal workers have been laid off.

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Doge’s official goal is to cut $1 trillion in federal spending. This administration expects to fix the national debt from both ends. One, get rid of unnecessary federal spending by removing fraud, waste, and abuse—a mandate that Trump believes was entrusted to him by the people. Two, create an “External Revenue Service" from tariff revenues. The US President has claimed that higher import tariffs will “Make America Wealthy Again", and enable the government to reduce income taxes and pay down national debt.

5. Dollar: less central?

The US has had a “strong dollar" policy for years. This policy was recently reinforced by Treasury Secretary Scott Bessent. A strong dollar, which is also a reserve currency, is useful in two important ways. One, the US can penalize foes simply by freezing their dollar assets, as was done to Russia after the Ukraine invasion. This gives incredible power to the US. Two, robust demand for dollar assets (US T-bills, g-secs) keeps US government borrowing rates down, resulting in lower interest payments.

That is why any shift from the dollar is unpopular: talk of a BRICS currency was enough to make the US President threaten to impose 100% tariffs on BRICS countries—Brazil, China, Egypt, Ethiopia, India, Indonesia, Iran, Russian Federation, South Africa, United Arab Emirates.

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Indeed, data shows that central bank dollar holdings have been reducing, albeit slightly, since the first Trump term. Tariffs will not reverse this trend; instead, to ensure the dollar’s global centrality, the administration will have to create confidence about the US economy and its future direction.