Trump’s 2026 trade agenda mistakes reshuffling deficits for strategy 

The Trump administration’s recently released 2026 Trade Policy Agenda declares that “America is back.” It argues that tariffs, “reciprocal” trade deals and sector-specific interventions are rebuilding U.S. manufacturing, shrinking the trade deficit and strengthening national security. 

It’s a gripping narrative, but it’s a canard. 

Trump’s misplaced preoccupation with bilateral trade deficits is no secret. Not surprisingly, the document views them as both the cause and proof of America’s economic decline. It cites factory closures and job losses as contributing to a “national emergency posed by the conditions of the large and persistent trade deficit overall.” 

The implicit claim is that reducing the deficit is the key to restoring industrial strength. But tariffs cannot reduce the trade deficit and are not a substitute for industrial policy. 

A country’s trade deficit reflects the gap between national saving and investment. The U.S. has long run deficits because it attracts global capital, consumes more than it saves and has long been a safe destination for investment. Tariffs may shift around bilateral trade flows, but they don’t change the underlying macroeconomic drivers of the current account. 

While the document acknowledges that the overall current account deficit has hovered between 3.4 and 4.1 percent of GDP in recent years, it does not even........

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