Pyden&Rygel | Data released last week shows that the US nominal goods trade deficit widened to $1.2 trillion in 2025, the highest level since 1960. This occurred despite the most significant tariff tightening in decades, which had the explicit goal of narrowing that very gap.
How can this contradiction be explained?
The answer lies in the reorganization of supply chains. Importers took advantage of differences in tariff rates between countries, shifting purchases away from economies with higher levies—such as China or Canada—toward others with lower average tariffs. Following the increase of the effective tariff rate on China to 40%, US goods imports from that country fell by 30% in 2025 compared to 2024.
In parallel, countries such as Switzerland, Vietnam, and Taiwan recorded the largest increases in their share of US imports, reflecting a clear reallocation of trade flows.
As a result, although the average tariff rate was estimated to be around 30% in April 2025, the actual effective rate—once supply chain shifts and ongoing bilateral negotiations were factored in—stood at approximately 10% by November 2025.
Ultimately, global trade proved to be far more resilient than investors initially anticipated. Rather than causing a structural contraction, the tariff policy led to a diversification of trade flows which, paradoxically, may have strengthened supply chain resilience against future crises.
