Global Edition | 8 April 202

The reaction of the markets came amid mounting criticism against the tariff hikes, with increasing numbers of economists and analysts offering insights into why Trump’s obsession with trade deficits is wrong.

The purported logic of the tariffs is that they’re designed to reduce the trade deficits America has with its trading partners. But, as Professor of Economics at Boston University Tarek Alexander Hassan explains,Trump’s frenzied attacks on the trade deficit show he’s misreading a sign of American economic strength as a weakness. If he really wants to eliminate the trade deficit, he should turn his attention to reining in the federal budget deficit.

What about the formula the Trump administration used to calculate what tariffs to impose? Peter Draper and Vutha Hing at Adelaide University argue that it’s detached from the rigours of trade economics. The formula assumes every trade deficit is a result of other countries’ unfair trade practices. And that’s simply not the case.

Caroline Southey Founding Editor

Published: April 7, 2025 1.46pm BST

Author

1. Tarek Alexander HassanProfessor of Economics, Boston University

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Tarek Alexander Hassan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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When U.S. President Donald Trump imposed sweeping new tariffs on imported goods on April 2, 2025 – upending global trade and sending markets into a tailspin – he presented the move as a response to a crisis. In an executive order released the same day, the White House said the move was necessary to address “the national emergency posed by the large and persistent trade deficit.”

A trade deficit – when a country imports more than it exports – is often viewed as a problem. And yes, the U.S. trade deficit is both large and persistent. Yet, as an economist who has taught international finance at Boston University, the University of Chicago and Harvard, I maintain that far from a national emergency, this persistent deficit is actually a sign of America’s financial and technological dominance.

Continue reading The trade deficit isn’t an emergency – it’s a sign of America’s strength →

Authors

1. Peter DraperProfessor, and Executive Director: Institute for International Trade, and Jean Monnet Chair of Trade and Environment, University of Adelaide
2. Vutha HingLecturer in International Trade, University of Adelaide

Disclosure statement

Peter Draper receives funding from the European External Action Service and Australian Department of Foreign Affairs and Trade, for project-specific work connected to trade policies. He is affiliated with the Australian Services Roundtable (Board Member); the International Chamber of Commerce (Research Foundation Director); European Centre for International Political Economy (non-resident Fellow); German Institute for Development and Sustainability (non-resident Research Fellow); and Friends of Multilateralism Group (member).

Vutha Hing receives funding from Economic Research Institute for ASEAN and East Asia. He is affiliated with Trade Policy Advisory Board, Royal Government of Cambodia.

Continue reading No, that’s not what a trade deficit means – and that’s not how you calculate other nations’ tariffs →