An economist burst into laughter on live television after being asked whether President Donald Trump’s tariffs are working.
The exchange aired on CBC News’ “Power & Politics,” where University of Michigan economist Justin Wolfers reacted in real time to new trade data.
New data from the Commerce Department show the U.S. trade deficit in goods rose 2% in 2025 to a record $1.2 trillion.
The shortfall between the value of goods the U.S. exports and imports grew during a year marked by high tariffs and trade tensions.
Asked what the numbers say about the effectiveness of Trump’s trade agenda, Wolfers responded first with laughter. Then he said, “Oh wow.”
He continued: “If the trade deficit this year is bigger than it was last year, and this year we have high tariffs and a trade war, and last year we didn’t, I guess it doesn’t require a lot of fancy statistics to infer that Trump’s tariffs didn’t help the trade deficit.”
Wolfers argued that the policy not only failed to shrink the deficit but made it worse.
“Now we see proof positive, finally, that the numbers do bear out the case that this was never going to shrink the deficit. It was only going to exacerbate it,” he said.
Is A Trade Deficit Even A Problem
But Wolfers did not stop at criticizing the outcome. He challenged the entire idea that a trade deficit is a problem in the first place.
“I actually want to take it back one level, which is to say not even admit the premise that the trade deficit’s a problem,” he said.
He reframed the issue in simple terms. The U.S., he said, sends “pieces of paper”, dollars abroad, and receives goods in return.
“We received more stuff from the rest of the world than we sent to the rest of the world,” Wolfers said. “It’s a trade deficit in pieces of paper, U.S. dollars. It’s a trade surplus in stuff.”
He added, “Doesn’t stuff make you just as happy as pieces of paper?”
Wolfers said the word “deficit” invites people to assume something is wrong.
“This whole idea that we were running a trade deficit literally the terminology invites one to, I mean, deficits sound bad,” he said.
In his view, trade is about individual choices.
“Americans who are buying stuff from abroad when they think it’ll make them better off and they’re selling stuff abroad when they think it’ll make them better off,” he said.
“A country is not a company.”
The Bilateral Deficit Argument
Trump has often focused on bilateral trade deficits, especially with China. Wolfers dismissed that concern as well.
“The president is obsessed with what economists call a bilateral trade deficit,” he said.
To explain why he believes that focus is misplaced, Wolfers used a personal example.
“I run a trade deficit with the grocery store,” he said. “I go there all the time, and I give them pieces of paper and get stuff.”
He said he also runs a trade surplus with his employer because he sells services and receives pay.
“It doesn’t matter that I’m running a deficit with this bloke over here as long as I’ve got enough money to support the habits that I’m spending,” he said.
Trade Flows Shift Instead Of Shrinking
The 2025 data also show Mexico has overtaken Canada as the top U.S. trading partner. For the first time since 1992, the U.S. now imports more from Taiwan than from China.
Wolfers said that shift was predictable.
“Every single one” of his economics textbooks, he said, would show that tariffs change trade patterns instead of eliminating deficits. He agreed that the policy changed “the flow of the river rather than the river itself.”
He also warned that retaliation has hurt U.S. businesses.
“We put tariffs on others. Others retaliated with tariffs back,” he said. “We’re now in a trade war. No one wins in a war. Everyone gets a little bit hurt.”
Some industries have felt that pain directly. Wolfers said the Kentucky bourbon industry understands what happened to its sales after foreign retaliation.
Wine producers who lost Canadian markets understand it too.
But he suggested the broader American public may not connect those dots.
“If you talk to regular Americans, there is simply so much going on over here right now,” he said. “I don’t think it’s having the broad-based political effect you might hope it’s having.”
Geopolitical Consequences
As Canada works to strengthen trade relationships with the European Union and Indo-Pacific nations, Wolfers called U.S. policy self-defeating.
“If you decide that you want to be the bully at the middle school lunch table,” he said, “come high school, they realize they can just go sit at another table and make another group of friends.”
He argued that trade disputes can quickly become geopolitical.
“Yes, this starts as a set of trade issues, but it becomes geopolitical very quickly,” Wolfers said.
In the end, his central point was straightforward. The tariffs were meant to reduce the trade deficit and restore U.S. manufacturing.
Instead, the deficit hit a record high, manufacturing jobs declined, and key trading relationships shifted.
And when asked whether the strategy is working, his first reaction said as much as his words.
IMAGE CREDIT: “President Donald Trump” by Gage Skidmore, via Flickr. Licensed under CC BY-SA 2.0. Image adjusted for layout.