The Terms of America First Trade Deals

Introduction

In 2024, the United States ran a $1.2 trillion goods trade deficit, the largest on record and equal to roughly 4.1% of GDP. For context, prior to the turn of the century, the goods deficit typically hovered around 1.5% of GDP. The widening gap, particularly during the last two decades, reflects growing trade imbalances and the steady offshoring of U.S. manufacturing, which have left supply chains, and thereby U.S. economic security, vulnerable during times of uncertainty, while displacing millions of American manufacturing workers for cheap and unethical Chinese laborers. The goods deficit, eclipsing $1 trillion, is a stark reminder of the urgency required to begin rebuilding domestic capacity and strengthening American competitiveness on the international stage--which is why President Trump’s “Liberation Day” was so pivotal for reclaiming America-first interests with our trading partners.

Tariffs and the Failure of the Multilateral Trade System

At the most basic level, a tariff is a levy placed on a product as it is imported or exported. Tariffs can be applied unilaterally by a single country, negotiated bilaterally between two countries, or governed through multilateral rules to which the U.S. is a party such as those governed by the World Trade Organization. Under the WTO’s most favored nation (MFN) model, members of the organization pledge to apply low level tariff rates on all MFN countries. As the WTO defines MFN:

[T]reating other people equally[.] Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favor (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.

In practice, however, the system has produced significant imbalances, as U.S. trading partners maintain higher tariff rates and more burdensome non-tariff barriers on American goods. It comes as no surprise that many of these disparities have become more prevalent since China’s admission to the WTO in 2001 Which in of itself has directly led to more than five million manufacturing jobs leaving the United States, being outsourced to take advantage of cheap, unethical, and Chinese slave labor.

Former United States Trade Representative Robert Lighthizer also pointed out how egregious a deviation the WTO’s MFN definition is from reality:

The international trading system has devolved into one of wildly uneven tariffs, rules that apply to some countries but not others, and scores of so-called free-trade agreements that in many cases codify protectionism and undermine the core WTO principle of most-favored-nation treatment.

Under this scheme, the coupling of tariffs and non-tariff barriers specifically targeting U.S. goods makes U.S. exports more expensive for overseas markets, so foreigners consume less. On the other hand, the U.S. imposing relatively lower tariffs on foreign goods makes them cheaper for American consumers, so they consume more of them. When U.S. imports of foreign goods outpace foreign consumption of U.S. goods, a trade deficit occurs (i.e., imports > exports). Since its first term, the Trump Administration has criticized the WTO’s dispute-settlement and appellate process. As a result, the Administration has favored bilateral and reciprocal measures as an alternative, as is evident by Liberation Day and subsequent trade agreements.

Liberation Day and Bilateral Tariff Negotiations

On April 2, 2025, coined “Liberation Day,” the Trump Administration took significant action to address the growing trade deficit. Through Executive Order 14257, President Trump announced a sweeping tariff regime, intended to finally rebalance the U.S. trade deficit. The Administration began its trade negotiations by imposing a baseline 10% tariff on all trading partners, followed by country specific reciprocal tariffs, with “reciprocal” meaning tariffs carefully calculated based on a country’s trade deficit with the U.S. The initial, calculated rates were typically between 10%-20%, but high-deficit trading partners, like Vietnam, faced rates up to 50%. Next, the Administration negotiated individually with trading partners interested in new trade agreements. As a result, the president delivered sweeping trade reform aimed at eliminating sizeable U.S. trade deficits, and prioritizing American companies, guaranteeing that the American worker feels the impact of U.S. industry revitalization.

American companies have historically faced an unfair export environment. American exports have been consistently subjected to relatively high tariffs and unfair non-tariff barriers that have weakened the competitiveness of U.S. companies overseas and spurred the growing trade deficit. One prevalent example prior to April 2, 2025, was of American agriculture exporters who were looking to ship to the U.K. They faced an average applied tariff rate of 9.2%, while U.K. exporters were only subject to an average applied rate of 5% when sending their goods to the U.S. Negotiating fair trading terms, like those above, help the American worker by ensuring that employment opportunities in key sectors such as agriculture are preserved in the U.S., rather than outsourced for cheap labor abroad.

The previous administration did not confront theses imbalances with U.S. trading partners, and American companies and workers continued to be neglected, resulting in the overall deficit sharply increasing. Following Liberation Day, however, the Trump Administration successfully negotiated trade deals that prioritize American workers, companies, citizens, and address individual trade deficits. The chart below, illustrates the 3-month moving average of the overall trade deficit (the average of data from three consecutive months) under both the Biden Administration and the Trump Administration. The data show a clear inflection point coinciding with the start of the trade deal implementation. Within a few months, the three-month moving average of the deficit had fallen to nearly half its level before President Trump took office. The following sections will examine several of the agreements that contributed to this sharp decline in the overall deficit.

United Kingdom

The U.K. was the first country to negotiate a new trade deal with the Trump Administration. The two countries agreed to the elimination of the U.K.’s 19% tariff on ethanol, the U.S.’s largest agricultural export to the U.K. As a result, this provision alone has created an estimated $700 million in new market opportunities.

Vietnam and Indonesia

The next countries with announced trade deals were Vietnam and Indonesia—which have the 3rd and 15th largest trade deficits with the U.S. in 2024 totaling $140 billion. Although Vietnam and Indonesia are both a part of the WTO and thereby grant the U.S. “MFN” status, they imposed average applied rates of 9.4% and 8.0% on U.S. exports, respectively. On the other hand, the U.S. MFN rate for both countries stood at 3.3.%. After the Administration initially imposed a 46% blanket reciprocal tariff, Vietnam agreed to provide duty-free access for U.S. exports, while still allowing the U.S. to maintain a 20% reciprocal rate on their exports. Similarly, Indonesia opened its markets to over 99% of U.S. goods duty-free, while allowing the U.S. imposition of 19% tariff rate on their goods. Furthermore, both Vietnam and Indonesia are still subject to a 40% tariff on goods that are deemed to be transshipped. This is tactic often used by both China and Russia, and they tend to use Southeast Asian nations (like Vietnam and Indonesia) to do so.

European Union

In July, the U.S. and the E.U. agreed to a trade deal of their own. The E.U. accepted a “zero-for-zero” tariff framework— mutually agreeing to eliminate tariffs on a given basket of products— on aircraft and aircraft-related parts, chemicals, semiconductor equipment, agricultural products, natural resources, and critical raw materials. For exporters, this deal will open unprecedented opportunities to the E.U., which imported over $2.7 trillion in goods during 2024.

Non-tariff Barrier Negotiations

The announced trade deals also address unfair and burdensome government policies or administrative measures (such as quotas, import licensing, technical or sanitary standards, customs delays, subsidies, and local-content rules) that restrict import penetration and are known as “non-tariff barriers.” For years, foreign governments have used these non-tariff barriers to make it difficult for American products to penetrate their markets at a competitive price. Additional administrative and compliance costs necessary to adhere to these policies typically drive up the overall export costs. The announced trade deals have slashed many longstanding non-tariff barriers. For example, the U.K. raised its quota on American beef from 1,000 metric tons to 13,000 metric tons (or 2,205,000 pounds to 28,660,094 pounds), creating nearly $250 million in new market opportunities for ranchers.

Another example of a successfully negotiated non-tariff provision is with Indonesia, who will grant U.S. industry access by exempting American firms and goods from a host of technical and regulatory barriers and will specifically waive all import-licensing for U.S. food and agriculture, grant permanent Fresh Food of Plant Origin (FFPO) designation, while recognizing U.S. meat, poultry, and dairy facility certifications.5 In addition, for the first time, Japan will approve U.S. automotive standards and will lift other restrictions that have long impacted American companies’ ability to enter their market. Moreover, Japan raised the rice quota by nearly 75%, providing increased market access for American rice farmers. The E.U. also agreed to streamlining non-tariff provisions, including Sanitary and Phytosanitary Measures (SPS) rules for meat, dairy, and other foods, while additionally providing mutual recognition of equipment testing for machinery, electronics, and chemicals.

Strategic Procurement and Investment Pledges

Strategic investment pledges and procurement commitments secured by the Trump Administration with U.S. trading partners are crucial for revitalizing America’s domestic capabilities. For example, Japan’s $550 billion investment commitment is designed to help bolster U.S. energy infrastructure, semiconductor fabs, critical-minerals mining, processing, and refining technology. Indonesia has committed to investing $15 billion in aerospace, agriculture, and energy industries, with 100 Boeing aircraft purchases and $4.5 billion in agricultural purchases. Moreover, pledges from E.U. member states’ in energy procurement and $600 billion in capital investments through 2028 will strengthen domestic supply chains. Furthermore, a partnership with South Korea to establish a $150 billion shipbuilding fund will push the United States closer to par with China in shipbuilding capacity.

Conclusion

The recently announced trade deals hold countries accountable for unfair trading practices and distorted deficits by improving tariff provisions, decreasing non-tariff barriers, and securing investment commitments. Despite the complacency from the Biden Administration that exacerbated the hollowing-out of some of the most important domestic industries, this administration has unlocked new market opportunities for over $5 billion in farm exports, opened hundreds of billions in industrial market access, and attracted more than $1 trillion in foreign investment commitments. Maintaining strong, yet equitable, relationships with key trading partners is crucial to cultivating a long-term, prosperous trading regime. What has transpired thus far is a strong start to rejecting misaligned practices from the past. The scale and trajectory of the trade deficit make it clear that the necessity for impactful America First trade deals must be at the forefront of the trade agenda to restore the competitiveness of American producers both domestically and on the global stage.