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President Donald Trump has repeatedly pointed to tariffs as a key tool for reshaping U.S. trade — and he has argued that a falling trade deficit proves the policy is working.

"THANK YOU MR. TARIFF!" Trump previously wrote on Truth Social after celebrating a sharp, 55% drop in the trade deficit (1).

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But a falling trade deficit doesn't necessarily mean tariffs are working in everyone's favor. As the administration rolls out another round of tariffs, economists say the bigger picture is more complicated — including whether the costs eventually land on American businesses and consumers.

According to the latest U.S. International Trade in Goods and Services report from the Bureau of Economic Analysis, the trade deficit has narrowed significantly so far this year. Through May 2026, the U.S. goods and services deficit was down $203.9 billion, or 40.6%, compared with the same period last year. The drop was fueled by a $164.7 billion increase in exports and a $39.2 billion decline in imports.

But the picture isn't quite as straightforward when you zoom in month by month. In May, the deficit actually widened to $77.6 billion, up from $54.6 billion in April (2).

A trade deficit occurs when a country imports more than it exports — and the U.S. has carried a massive trade deficit for decades.

Of course, the trade deficit doesn't move for just one reason. Changes in consumer demand, business inventories, currency swings and the broader global economy can all influence how much the U.S. buys from and sells to other countries.

The timing also matters. In early 2025, many businesses rushed to bring in goods before expected tariff changes took effect. That import surge created an unusually high starting point, which means the drop that followed may look bigger when compared with last year's numbers.

In other words, while tariffs may have contributed to changing trade flows, the size of the deficit drop alone does not prove they are the only reason behind the shift.