More accurate to say "Given dollar weakness YTD & monthly Census trade data, tariffs are probably modestly reducing the trade deficit **right now**, but past experience is no guarantee of future performance" etc. If USD starts appreciating, effect will quickly become ambiguous.
@ernietedeschi Actual trade deficit is tracking wider in 2025 (need August details to fill that data point so need shutdown to end) ... AI spending has meant more imports of electronics. Very clear in data
@ernietedeschi And the dollar isn't weak! the initial "Trump trade" rally wasn't sustained ... so the dollar didn't strengthen further from its strong 23/24 level. but still have a dollar at levels that historically reduced exports v GDP in a standard model. Just sayin'
@Brad_Setser So I was looking at spot monthly trade balance values, which show smaller deficits than the same months last year. But I get what you're saying, which is fair: on a cumulative basis including the wider deficits earlier in the year, YTD is tracking larger deficits. 1/2
