Commentary: The Real Gain of Trump’s Trade Deals

The U.S.’s recent “investment-for-tariffs” trade deals, negotiated with countries such as Japan, the European Union (EU), South Korea, and others, have raised significant questions about whether these agreements can truly mitigate future tariff risks and what trade conflicts remain unresolved. These deals involve trading tariff reductions or suspensions for promised investments or large-scale procurement commitments from U.S. trading partners. The analysis examines the progress and structure of these agreements, evaluates their feasibility, and discusses the longer-term implications for U.S. trade and fiscal policy. [para. 1]

As of August 1st, the U.S. had reached trade or suspension agreements with nine economies, thereby covering 49.7% of the value of U.S. goods imports. Key contributors include Germany (4.6%), China (10%), Japan (4.2%), and South Korea (3.6%). Major economies yet to reach agreements are Mexico (15%), Canada (11.3%), Taiwan (4.3%), India (3.2%), and Switzerland (4.8%)—indicating that about half the U.S. import value remains exposed to future tariffs. [para. 2]

Despite a high theoretical tariff rate of 18% as of August 1, effective tariff rates remain significantly lower. About 30% of U.S. imports enjoy zero tariffs due to exemptions, notably in sectors like electronics and energy. Actual second-quarter 2025 tariff revenue was $64 billion on $819.4 billion of goods imports—a 7.9% effective rate and a 3.6-fold increase over the previous year. The Trump administration’s approach has established a three-tiered tariff system: a base 10% tier for close allies and countries with small trade deficits, a mid-tier of 15%–20% for countries with deals (e.g., the EU, Japan), and a high tier (20%–50%) for countries without deals, such as India (25%) and Brazil (50%). [para. 3][para. 4]

A review of partners’ investment and procurement commitments reveals major implementation challenges. The EU’s pledge to invest $600 billion in the U.S. from 2025–2028 would require more than doubling its annual investment levels—an unlikely scenario given Europe’s own capital constraints and the voluntary nature of the investment. Japan’s $550 billion commitment relies largely on export credits/guarantees rather than direct foreign investment, covering only 1%–2% as equity. South Korea’s $350 billion pledge is even more ambitious, representing 19% of its GDP and vastly exceeding its historical U.S. investment flows, but some of this figure may include already approved plans. The EU’s procurement goal—$750 billion in American energy over three years—would necessitate Europe absorbing 75% of total U.S. energy exports, a logistically improbable target. In contrast, South Korea and Japan’s energy purchase pledges are more achievable, with South Korea’s plan requiring only an 8% increase over its 2024 levels. [para. 5][para. 6][para. 7][para. 8]

Ultimately, the greatest U.S. benefit may lie in sustained tariff revenue and ongoing negotiating leverage rather than in fully realized foreign investment or procurement. Tariff revenue has surged, with annualized proceeds reaching $125.6 billion by late July 2025 and projections of $300 billion by year-end. The U.S. fiscal deficit has already declined, and the Congressional Budget Office projects $2.8 trillion in tariff revenue over the next decade. The Trump administration’s strategy marks a departure from historical approaches that sought to address trade deficits via currency adjustments, instead leveraging tariffs for fiscal consolidation and to strengthen U.S. bargaining power. [para. 9][para. 10]

This new regime likely means continued high U.S. tariff use, potential secondary tariffs (notably on importers of Russian oil), and the threat of new product-specific tariffs. Unlike previous cycles—such as after the Plaza Accord—the dollar may prove more resilient due to underlying fiscal and policy changes. [para. 11]