Two rounds of tariff escalation, one aimed at China and one applied globally, have cut the U.S.-China deficit in half without shrinking the overall imbalance. Since 2018, the U.S. goods trade deficit with China has fallen 52 percent, from $419.5 billion to $202.1 billion in 2025. But the aggregate U.S. trade imbalance did not shrink. It relocated to other Asian manufacturing hubs. The deficits with Vietnam, Taiwan, Thailand, and India all reached record highs in 2025, with Taiwan’s deficit increasing 865 percent over the period, and Vietnam’s 351 percent. Tariffs redirected the geography of U.S. trade imbalances without reducing their scale.
Trade within North America is built on deeply integrated supply chains. Mexico and Canada together accounted for $674 billion in U.S. goods exports in 2025, about a third of all U.S. goods exports and roughly $260 billion more than U.S. exports to the European Union. About 74 cents of every dollar of manufactured goods exported from Mexico to the United States originates within North America, reflecting the large share of U.S. and Canadian inputs embedded in regional production. These are not imports competing with U.S. workers. They are the output of a joint production system built over three decades. The import-to-export ratios tell the same story: In 2025, the United States imported $1.58 from Mexico and $1.14 from Canada for every dollar it exported to each country. By contrast, imports from Vietnam were 12.4 times larger than U.S. exports to Vietnam. That is not coproduction. It is one-directional sourcing that can erode domestic industrial capacity without building supply chain resilience.
The shift is accelerating. The U.S. deficit with Taiwan nearly doubled between 2024 and 2025 alone, rising 99.1 percent as semiconductor-related imports surged. Meanwhile, the U.S. deficit with Vietnam reached $178.2 billion in 2025, just $18.7 billion below the U.S. deficit with Mexico. If present trends hold, Vietnam could soon surpass both Mexico and Canada in bilateral deficit terms.
