- It is true that — as U.S. Vice President Kamala Harris claimed during the Sept. 10, 2024, presidential debate — when former President Donald Trump left the White House, the trade deficit had reached almost $63 billion, one of its highest levels ever.
- At that moment in time, the highest trade deficit in U.S. history occurred in August 2006, when George W. Bush was president. In fact, it had remained in a historically high monthly range (between $57 billion and $68 billion) from August 2005 through October 2008, near the end of Bush's second term.
- After Biden took office in 2021, the trade deficit continued to soar. It reached its highest point ever in March 2022, 14 months into Biden's presidency. The annual trade deficit for that year totaled nearly $1 trillion.
- So, while it's true that Trump presided over one of the highest trade deficits in U.S. history, Biden presided over the highest trade deficit in U.S. history.
During the Sept. 10, 2024, televised debate between U.S. Vice President Kamala Harris and former President Donald Trump, the rivals in the upcoming November presidential election, Harris claimed Trump's administration had left the country with "one of the highest" trade deficits in history:
HARRIS: Well, let's be clear that the Trump administration resulted in a trade deficit, one of the highest we've ever seen in the history of America. He invited trade wars. You want to talk about his deal with China, what he ended up doing is — under Donald Trump's presidency — he ended up selling American chips to China to help them improve and modernize their military, basically sold us out when a policy about China should be in making sure the United States of America wins the competition for the 21st century.
Harris' assertion was accurate, but as we'll see, the deficit's continued growth under President Joe Biden, Trump's successor, undercuts her point.
The U.S. Census Bureau tracks the trade deficit, also known as the balance of payment for goods and services. It is the gap between the country's exports of goods and services, and its imports. It's measured in dollars, typically not adjusted for inflation. The Census Bureau has published annual numbers for the trade deficit since 1960, as well as monthly numbers since 1992. Both annual and monthly numbers reveal the same truth: that indeed, at the time Trump left office in January 2021, the U.S. trade deficit was one of the highest ever recorded.
Looking at annual numbers, the trade deficit hit a record high under George W. Bush's administration in 2006, at $763.532 billion. From 2005 through 2008, it remained above $700 billion. In 2020, the last full year Trump was president, it was $653.691 billion, the fifth-largest annual trade deficit on record up until that point.
Monthly numbers show a similar story:
(St Louis Federal Reserve)
While the monthly trade deficit hit a record high in August 2006 at $68.277 billion, it rose again to $64.703 billion in November 2020 while Trump was in the White House, inching back down to $62.779 in January 2021, the last month Trump was in office.
However, an examination of the data after January 2021 reveals that the trade deficit at the end of Trump's term was far from reaching its record high.
From the moment Biden took over the presidency to 2022, the trade deficit soared. In fact, the monthly deficit reached $101.914 billion in March 2022:
(census.gov)
Annual numbers show that for the whole of 2022, the trade deficit ballooned to $944.762 billion. In fact, 2021, 2022 and 2023 marked — respectively — the second-highest, highest and third-highest annual trade deficits in history, relegating 2020's to the eighth-largest since records first started being kept in 1960.
What Causes a High Trade Deficit?
Recovery from the pandemic, inflation and high energy prices can explain at least part of the trade deficit's size under Biden, because trade deficit numbers aren't adjusted for inflation. Energy costs rocketed after Russia invaded Ukraine in February 2022. But this increase was also a result of the raised trade barriers the Trump administration imposed on China, most of which Biden kept in place.
In a move toward protectionism, Trump imposed tariffs on Chinese goods starting in January 2018. Two months later he added tariffs on steel and aluminum imports. By mid-2018, the U.S. and China were in a full-blown trade war. The Tax Foundation, a conservative think tank that focuses on taxes, said Trump had collected "nearly $80 billion worth of new taxes on Americans by levying tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019, amounting to one of the largest tax increases in decades." For the entirety of his presidency, that number rose to $89 billion.
Due to these tariffs, importers of goods in the U.S. began to reconfigure their supply chains, seeking goods from countries other than China like Mexico or Canada. But also many continued to import goods from China, simply assuming the increased expense the tariffs created.
Once in office, Biden maintained most of these tariffs. According to the Tax Foundation, his administration had collected $144.2 billion in tariffs by April 2024. In May 2024, he even announced a tariff increase on $18 billion of Chinese goods.
It is uncertain which direction the trade deficit will take, though in 2024, the monthly trade gap began to grow again. Both the Tax Foundation and The Economist Intelligence Unit warned of "looming trade wars" should Trump get elected in November 2024. Said the Tax Foundation:
Candidate Trump has proposed significant tariff hikes as part of his presidential campaign; we estimate that if imposed, his proposed tariff increases would hike taxes by another $524 billion annually and shrink GDP by at least 0.8 percent, the capital stock by 0.7 percent, and employment by 684,000 full-time equivalent jobs. Our estimates do not capture the effects of retaliation, nor the additional harms that would stem from starting a global trade war.