Analysis Reveals Trump’s Trade Deal Increased Trade Deficit

A recent analysis from the Economic Policy Institute (EPI) presents a critical overview of the United States-Mexico-Canada Agreement (USMCA), claiming that the trade deal initiated during Donald Trump‘s presidency has “created more problems than it fixed.” The report highlights significant shortcomings in achieving Trump’s initial objectives, particularly in reducing the US trade deficit with Canada and Mexico.

According to the EPI report, published on October 12, 2023, the trade deficit has escalated from a combined $125 billion in 2020 to an alarming $263 billion projected for 2025. This increase is notably pronounced in the automotive sector, where imports of vehicles and parts from Mexico nearly doubled since the implementation of USMCA. The report, authored by EPI senior economist Adam S. Hersh, states that imports surged from $196 billion in 2019 to $274 billion in 2024. Specifically, light-duty vehicle imports rose by 36%, while medium- and heavy-duty vehicle imports skyrocketed by 256%.

The analysis further identifies a significant loophole within the trade deal that has enabled Chinese manufacturers to gain duty-free access to North American markets. This has led to a substantial increase in Chinese investment in Mexico, with direct investments expanding by as much as 288% through 2023. The report starkly concludes that the pressures on manufacturing jobs and the deterioration of the trade balance with Mexico are now worse than prior to the establishment of USMCA.

Opportunities for Improvement in Trade Relations

Despite the negative findings, the EPI report suggests that the US, Canada, and Mexico have a chance to address these issues, as the USMCA is set for review in 2024. Among the recommendations, the report advocates for closing loopholes that allow foreign manufacturers to benefit disproportionately, enhancing the Rapid Response Labor Mechanism to better wages and working conditions, and revising intellectual property rights provisions that currently hinder local laws designed to mitigate digital service-related negative externalities.

On the same day, the American Economic Liberties Project’s Rethink Trade program released an analysis echoing the concerns raised by EPI. It revealed that the US trade deficit has actually increased more during the first nine months of 2025 compared to the same period in 2024. Additionally, the report noted a loss of 49,000 manufacturing jobs since the beginning of Trump’s second term.

Lori Wallach, director of the Rethink Trade program, remarked that the recent data contradicts Trump’s promises to lower the trade deficit and revitalize domestic manufacturing. Wallach emphasized that Trump’s trade agreements appear to prioritize the interests of large corporations over the needs of American workers and firms, thereby failing to address the root causes of the trade deficit.

As discussions surrounding the USMCA evolve, stakeholders in the US, Canada, and Mexico may have a pivotal opportunity to reshape trade relations in a manner that better serves all parties involved. The upcoming review could prove crucial in determining the future landscape of North American trade.