Trade Tug of War: America’s Largest Trade Deficits

Trade Tug of War: America’s Largest Trade Deficits

Trump put tariffs on Canadian and Mexican imports on March 4, with some temporary exemptions announced March 6. The president has also announced an additional tariff on Chinese imports.

Alongside undocumented immigration and drug trafficking, the president has cited trade deficits as a reason for tariffs. In this Markets in a Minute graphic from Terzo, we highlight the countries involved in the largest U.S. trade deficits.

Ranking Trade Deficits in the U.S.

A trade deficit occurs when the U.S. imports more from a country than it exports. 

The White House has declared that the trade deficit “threatens our economic and national security, has hollowed out our industrial base, has reduced our overall national competitiveness, and has made our Nation dependent on other countries to meet our key security needs.” In an attempt to address the deficit, the Trump administration plans to impose tariffs on many of America’s trading partners.

 In 2024, China had by far the largest deficit in goods traded. Mexico’s deficit follows at -$172 billion, and the U.S. has a trade deficit of -$63 billion with Canada. Together, the three countries make up 41% of total U.S. imports.

EU members Ireland and Germany also represent some of America’s highest trade deficits. In a recent appearance, President Trump has said tariffs on EU goods will be coming soon.

The Business Impact of Tariffs

Many experts believe that tariffs aren’t effective at reducing trade deficits. However, they will impact supply chains and corporate finances.

Legally, a business importing goods pays the fee. The company then has the choice to either pass the cost on to consumers, or absorb the cost. The latter isn’t typically possible for industries with small profit margins. For a company that does absorb the cost, this can result in less money for making investments in the company’s growth. 

A company can also switch to a domestic supplier where possible, though prices would typically be higher than what they were previously paying a foreign supplier.

Businesses who export can also be affected. If fewer domestic dollars are sent abroad, the smaller supply can raise the currency’s value and make the country’s exports more expensive to buyers. Targeted countries may also impose retaliatory tariffs. For instance, the U.S. Department of Agriculture estimates that exporters of agricultural commodities lost $13.2 billion from mid-2018 through 2019 due to retaliatory tariffs.

Unpredictable tariffs threaten your bottom line. Stay ahead with real-time contract and spend insights from Terzo to protect margins and optimize costs.