When the Trump administration implemented tariffs in April 2025, it argued that this was one of the fundamental steps to reduce the trade deficit in the U.S. However, less than a year later, this policy began to be debated not only for its economic consequences but also for its legal basis, which was brought before the U.S. Supreme Court. Therefore, the issue today is not only whether tariffs reduced the deficit, but also what authority was used to implement such a broad trade intervention.

Nevertheless, the economic side of the debate remains: 2025 data provides an opportunity to test whether tariffs have had a truly lasting impact on the trade deficit. Moreover, the war between the U.S.-Israel alliance and Iran shows that this debate is not limited to tariffs and court rulings, but that a new layer of geopolitical danger has entered the picture, one that could affect global trade and cost balances.

The data we have tells us two things. First, even in 2025, a year when tariffs were in place, the U.S. trade deficit did not close overnight. Second, the path of the deficit throughout the year has been quite volatile. This makes it difficult to gauge the impact of tariffs. This is because there is no single factor determining the impact of tariffs. Companies' stockpiling behavior, the direction of imports, domestic demand, the dollar's trajectory and energy prices all have an effect at the same time.

How the tariff policy was designed was just as important as its results. The approach, which began with a general rate in April 2025, became more selective over time. Tensions with China, Canada, Mexico and the European Union showed that this policy was no longer a one-size-fits-all measure.

U.S.-China trade, in particular, presents a clearer picture in this regard. In 2025, the U.S. trade deficit with China fell to $202.1 billion, a significant decrease compared to the previous year. During the year, the approach softened in some areas, particularly toward China and several other countries, while negotiations took center stage in others. This shows that the change in the data was influenced not only by economic conditions but also by the way the policy was implemented.

Economic, legal limits

Tariffs are now being discussed not only in terms of their economic consequences but also in terms of their legal basis, which is the subject of direct litigation. Therefore, when evaluating the 2025 tariffs, it is necessary to look not only at the change in the trade deficit but also at the authority under which this policy is being implemented.

The Trump administration based a significant portion of the tariffs on a law that grants the president broad powers to regulate certain economic transactions after declaring a national emergency. The International Emergency Economic Powers Act (IEEPA), which came into force in 1977, was actually designed to facilitate rapid action in times of crisis. However, its expanding scope over time has sparked new debates about the limits of the economic powers granted to the president.

The Trump administration interpreted the phrase "regulate imports” broadly and implemented a wide-ranging set of tariffs under this framework. This is where the debate grew. This interpretation blurred the line between Congress, which holds fiscal powers such as taxation and customs in the U.S., and the president's emergency powers.

The Supreme Court's 6-3 decision drew the line on this interpretation. The essence of the ruling was that the underlying law did not grant the president the authority to impose tariffs and that such a broad tariff regime required explicit congressional authorization. The court also noted that no president had ever used this law to impose tariffs on this scale in the past. This situation shows how easily legal and institutional boundaries in the U.S. can be stretched on such a major issue affecting the global economy.

The court ruling did not end the debate. The Trump administration's subsequent turn to Section 122 of the Trade Act of 1974 showed that the search for legal grounds continued. This section allows for temporary and broad-based tariffs in cases of large and serious balance of payments deficits. However, the situation the U.S. faces today is not a balance of payments crisis in the classical sense. It is more of a current account and foreign trade deficit debate. Therefore, turning to Section 122 after IEEPA, while indicating a continued desire to maintain tariffs, reveals that the legal and economic justification is still controversial. The problem is not only the level of tariffs. It is also the question of the authority, economic justification and duration of such a broad trade policy.

Another critical aspect of the decision is the continuing uncertainty. The court did not provide a clear framework on whether tariffs paid in the past would be refunded. The potential size of any refunds is creating a new debate for both companies and public finances. The fundamental reality that remains unchanged in the short term is this: In most cases, it is not foreign producers but American companies importing the goods that pay the tariffs.

Frequent adjustments, postponements or reactivations of the measure also increase uncertainty about how this cost will be managed. During such periods, companies are forced to make investment and import decisions based on shorter-term calculations, making it difficult to distinguish whether the movement in the trade deficit is a permanent trend or a temporary reaction.

Trade deficit after tariffs

The first quarter of 2025 was the period when the trade deficit peaked. The deficit remained at very high levels at the beginning of the year, reaching a peak of $136 billion in March. The decline began in April, the contraction became more pronounced in the fall, and the lowest level of the year was seen in October at $28.7 billion. However, this improvement could not be sustained until the end of the year. In December, the deficit rose again to $70.3 billion. This picture requires reading the tariff effect not by looking at a single month, but in conjunction with changing conditions and company behavior throughout the year.

The tariff debate is now not just an economic policy choice but also a performance claim. In his latest statements, Trump argues that the trade deficit has fallen by about 78% thanks to tariffs and suggests that the balance could turn positive by 2026. This claim sharpens the debate. On one side is the narrative of "success,” while on the other is the monthly data series showing whether this narrative is permanent or temporary.

However, the picture can no longer be interpreted solely based on the impact of tariffs. The war between the U.S. and Iran and the Middle East has added a new layer of uncertainty to this debate. Concerns about energy supply, the possibility of disruption to shipping through the Strait of Hormuz, and pressure on oil prices show that when assessing the trade deficit, it is necessary to take into account not only tariffs but also the impact of geopolitical shocks on costs and prices.

Ultimately, the 2025 data shows that tariffs do not automatically close the trade deficit. More notably, however, the legal limits of this policy have become as much a topic of debate as its economic consequences.

When the 2026 data is released, the lasting impact of tariffs on the trade deficit will become clearer. If the deficit falls permanently in 2026, the fluctuations we saw in 2025 can be interpreted as a transition period. Conversely, a renewed increase in the deficit will more clearly show that tariffs have changed the flow of trade rather than creating a permanent contraction.