The U.S. goods trade deficit reached $1.13 trillion in 2024, consolidating its position as a net debtor in global trade. This phenomenon, which has been accentuating in recent decades, is largely due to chronic deficits with key trading partners such as China and Mexico, whose negative balances amount to $295.4 billion and $171.8 billion, respectively. In addition, the deficit with the European Union reached $235.6 billion, while Vietnam and Germany contributed deficits of $123.5 billion and $84.8 billion, respectively.

The deficit growth reflects a structural pattern: while U.S. imports of consumer goods, technology and automobiles continue to rise, export capacity faces obstacles, especially in industrial and agricultural sectors. In 2024, total exports of goods and services totaled $3.19 trillion, while imports totaled $4.11 trillion. Within exports, sales of semiconductors and electronic components fell significantly, reflecting lower global demand in the technology sector. Likewise, agricultural exports, such as grains and meat, registered a decline in international demand, affected by changes in consumption patterns and tariff policies in key markets.

On the other hand, imports experienced growth in several items. Consumer goods, including cell phones, computers and electronic devices, led the increase in foreign purchases. In addition, imports of pharmaceutical preparations increased by $43.6 billion, reflecting the growing U.S. reliance on the health sector. Purchases of Asian-made automobiles and auto parts grew by $16.1 billion, highlighting the U.S. consumer's preference for models with advanced technology and more competitive prices.

Symptoms of Dutch disease?

Dutch disease is a situation in an economy that has a boom of a specific product that is in high demand in international markets. This generates an appreciation of the currency that negatively affects the rest of the sectors that lose international competitiveness. In the end, a lot of industry is lost, because with an overvalued currency, it is more attractive to import products.

The fracking boom and the growth of the oil industry in the United States have generated a surplus in the energy sector, but have strengthened the dollar, making it difficult for other exporting sectors to compete. The most surprising thing is that few have asked the question when it should be obvious: there is a sector that is boosting exports, increasing the supply of foreign exchange and consequently revaluing the dollar.

In an analysis released in 2017, Adams Nager, then an analyst at the Information Technology and Innovation Foundation, analyzed the issue in a paper titled "Is the United States Immune to Dutch Disease?". According to the paper, from 2012 to 2015, the appreciation of the dollar by more than 20% was accompanied by a 44% increase in the non-oil goods trade deficit. This situation had aggravated the loss of manufacturing competitiveness, generating obstacles for a possible reindustrialization based on competitive costs.

The appreciation of the dollar has also had an impact similar to that of currency manipulation by economies such as China, making U.S. exports more expensive and imports cheaper. The Renminbi had lost 12% in value against the dollar in that period, wiping out previous gains in its appreciation, reinforcing the U.S. competitive disadvantage in key manufacturing sectors.

Now, the trade imbalance is Donald Trump's real argument for reviving the threat of new tariffs. During his first term, the tariff strategy sought to reduce the deficit by imposing barriers to Chinese imports and renegotiating trade agreements such as the T-MEC. However, recent data suggest that these measures failed to reverse the structural trend in U.S. foreign trade.  Thus, the problem remains structural and unmanageable through executive orders alone.

One of the key factors in this dynamic is the value of the dollar. Every government is under pressure to maintain a certain weakness of its currency vis-à-vis other currencies, because that way it gains price competitiveness. This slows down competition from imported goods and stimulates demand for domestic products. A devalued dollar would make U.S. exports more attractive in global markets and, at the same time, make imports more expensive, reducing the deficit. However, an excessive depreciation could generate inflationary pressures by making imported goods more expensive, leading to an economic dilemma: raising tariffs at an accelerated pace could further fuel inflation and affect domestic consumption.

To counteract the effects of Dutch Disease, the United States must go beyond tariffs and focus on a strategy of innovation and technological development. Saudi Arabia, for example, has increased its investment in research and development from 0.25% to 2% of GDP in an effort to diversify its economy. In contrast, the United States spends less than 0.8% of its GDP on public research, the lowest level since the post-Sputnik era, Nager explained in his article.

Today it is worth asking whether what Donald Trump is trying to deal with is a much more structural evil that will not be overcome by tariff measures. Dutch disease has never been discussed in depth in the United States. Perhaps the time has come to do so.