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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.
Tariffs: help or harm?
The idea behind tariffs is simple: make imported goods more expensive so American-made products become more competitive. Supporters argue that it can help domestic businesses and reduce reliance on foreign suppliers.
But critics say tariffs can come with a catch. Because importers often pass those higher costs along, the bill can eventually land on U.S. companies and consumers through higher prices not the countries exporting goods to America.
That tradeoff is at the heart of the tariff debate — whether the benefits of protecting domestic industries outweigh the potential costs for businesses and households.
Research from the Federal Reserve Bank of New York found that nearly 90% of tariff costs are borne by U.S. firms and consumers, rather than foreign producers (3).
Data from the Yale Budget Lab has also suggested that tariff-related price increases can flow through to consumers, with estimates varying depending on the category of goods affected (4).
That means a shrinking trade deficit does not necessarily mean households are better off — especially if imported goods become more expensive.
Trump has repeatedly floated the idea of using tariff revenue to fund a “tariff dividend” for Americans, though no such payments have been approved.
Meanwhile, the administration continues to revise its trade strategy, rolling out new tariffs on some countries and products while businesses adapt to changing rules and higher import costs.
Those changes can make it harder for some businesses to plan pricing, sourcing and supply chains.
The bottom line? The trade deficit has moved lower this year, but economists remain divided over how much credit tariffs deserve — and whether any benefits outweigh the higher costs many businesses and consumers face.
Read More: Millionaires under 43 hold only 25% of their wealth in stocks. Here’s where their money is actually going
A classic safe haven
Whether tariffs end up helping or hurting the economy, they’ve added another layer of uncertainty for investors. That’s one reason many people are taking another look at traditional inflation hedges like gold.
When it comes to preserving wealth and fighting inflation, few assets have stood the test of time like gold. Its appeal is simple: unlike fiat currencies, the yellow metal can’t be printed at will by central banks.
Gold is also considered the ultimate safe haven. It’s not tied to any one country, currency or economy, and in times of economic turmoil or geopolitical uncertainty, investors often flock to it — driving prices higher.
Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, told CNBC last year that “People don’t have, typically, an adequate amount of gold in their portfolio,” adding, “When bad times come, gold is a very effective diversifier.”
Despite pulling back from record highs earlier this year, gold is still up about 25% over the past 12 months — a reminder of why many investors turn to the precious metal during periods of economic uncertainty. This also presents a buying opportunity to get in low, especially if you believe the precious yellow metal has room to roam even higher.
And other prominent voices see further potential. JPMorgan CEO Jamie Dimon previously said that in this environment, gold can “easily” rise to $10,000 an ounce.
A gold IRA is one option for building up your retirement fund with an inflation-hedging asset.
Opening a gold IRA with the help of Goldco allows you to invest in gold and other precious metals in physical forms while also providing the significant tax advantages of an IRA.
With a minimum purchase of $10,000, Goldco offers free shipping and access to a library of retirement resources. Plus, the company will match up to 10% of qualified purchases in free silver.
If you’re curious whether this is the right investment to diversify your portfolio, you can download your free gold and silver information guide today. Just keep in mind that gold is typically best used as one part of a well-diversified portfolio.
A time-tested income play
Gold isn’t the only asset investors turn to during inflationary times. Real estate has also proven to be a powerful hedge.
When inflation rises, property values often increase as well, reflecting the higher costs of materials, labor and land. At the same time, rental income tends to go up, providing landlords with a revenue stream that adjusts for inflation.
Over the past ten years, the S&P Cotality Case-Shiller U.S. National Home Price NSA Index has jumped by 87% (5), reflecting strong demand and limited housing supply.
Of course, high home prices can make buying a home more challenging, especially with mortgage rates still elevated. And being a landlord isn’t exactly hands-off work — managing tenants, maintenance and repairs can quickly eat into your time (and returns).
The good news? You don’t need to buy a property outright — or deal with leaky faucets — to invest in real estate today. Crowdfunding platforms like mogul offer an easier way to get exposure to this income-generating asset class.
mogul is a real estate investment platform offering fractional ownership in blue-chip rental properties, which gives investors monthly rental income, real-time appreciation and tax benefits — without the need for a hefty down payment or 3 a.m. tenant calls.
Founded by former Goldman Sachs real estate investors, the team hand-picks the top 1% of single-family rental homes nationwide for you. In other words, you gain access to institutional-quality offerings for a fraction of the usual cost.
Each property undergoes a rigorous vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Offerings often sell out in under three hours.
You can sign up for an account and then browse available properties here.
Another option is to go further than single-family rental homes and into multi-family or industrial deals, provided you have the capital on hand.
Accredited investors can now tap into this opportunity through platforms such as Lightstone DIRECT, which gives you access to single-asset multifamily and industrial deals.
Lightstone DIRECT’s direct-to-investor model ensures a high degree of alignment between individual investors and a vertically-integrated, institutional owner-operator — a sophisticated and streamlined option for individual investors looking to diversify into private-market real estate.
With Lightstone DIRECT, accredited individuals can access the same multifamily and industrial assets Lightstone pursues with its own capital, with minimum investments starting at $100,000.
— With files from Laura Grande
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Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
Truth Social (1); Bureau of Economic Analysis (2); Liberty Street Economics (3); Budget Lab Yale (4); S&P Global (5)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
