Since tariffs became the highlight of the Administration, they also became a highlight of the news as well as much of the conversation among Americans. Most of that news and conversation centers on higher prices that will be the result. It should be noted that currently, U.S. tariffs are among the lowest in the world and at the same time, there are few Americans who know or understand much about tariffs.
I have been asked by clients since the tariffs became a hot topic, for my professional opinion on the impact of increasing U.S. import tariffs. My response has consistently been that I believe the impact at this point is difficult to determine, but at the same time, I did not think the impact would be as negative as many have suggested. In the past, I have not supported tariffs. Not that I necessarily look for support for my opinion from the Federal Reserve, but they did indicate today the “inflationary impact of tariffs will be both transitory and relatively small.”
There are two related topics that I believe also deserve more attention - the U.S. balance of trade and U.S. public debt. On Jan. 1, 2025, the U.S. balance of trade for goods and services stood at a negative $156,000,000,000. That is MINUS 156 billion dollars! This is 152% greater than on Jan. 1, 2015. Monthly balance of trade data provided by the Federal Reserve of St. Louis goes back to 1992. Every month in this entire series shows a negative value. The value of goods and services that we import is valued at $156 billion MORE than those that we export. Aside from the availability of foreign-made goods, Americans have the willingness and ability to buy those imported goods. However, at some point, that large of a trade deficit may at some point become a problem, if it isn’t already.
Another figure and one that may be closely related is the U.S. public debt. On Oct. 1, 2024 (most recently released data) our public debt was $36,000,000,000,000 and 122% of GDP. That is 36 trillion dollars and double what it was 10 years earlier! In January 1966, it was 366 billion dollars and 40% of GDP!
Perhaps, it would be more beneficial for Americans to begin thinking “big picture” with regard to our trade deficit, the negative impact of an overwhelming federal debt, and long-term food security on the well-being of all Americans.
