This was supposed to be the year everything changed. After watching the trade deficit hover near a trillion dollars annually, Donald Trump made tariffs the centerpiece of his second-term economic strategy. The pitch was straightforward: shrink the gap, make trading partners pay up, and flip the script on decades of deficits.

So how'd that work out? Not quite as advertised.

The 78% Problem

Trump recently tweeted that the U.S. trade gap has been slashed by 78%, and that it will swing positive this year for the first time in decades. Bold claim. The actual data? Not so much.

On Thursday, the Census Bureau and Bureau of Economic Analysis dropped the official numbers. December's goods and services deficit came in at $70.3 billion, up a hefty $17.3 billion from November's $53.0 billion. Economists had expected around $55 billion.

But here's the real kicker: for the full year, the deficit totaled $901.5 billion. Compare that to 2024's $903.5 billion. We're talking about a $2 billion change on a base of nearly a trillion dollars. That's basically a rounding error, not a revolution.

Even with sweeping tariffs in effect, the trade balance stayed stubbornly deep in the red. In fact, 2025 posted the third-largest trade gap on record.

Winners, Losers, and Semiconductors

The country-by-country breakdown gets more interesting. The U.S. actually ran surpluses with several partners: the Netherlands at $60.7 billion, South and Central America at $52.4 billion, the United Kingdom at $32.2 billion, Hong Kong at $28.5 billion, and Brazil at $14.4 billion.

But the deficits with major trading partners remained massive. The European Union gap hit $218.8 billion. China stood at $202.1 billion. Mexico totaled $196.9 billion. Vietnam reached $178.2 billion. Taiwan clocked in at $146.8 billion.

Taiwan's deficit ballooned by $73.0 billion to $146.8 billion. Exports rose $12.1 billion to $54.7 billion, but imports exploded by $85.2 billion to $201.4 billion. Semiconductors, anyone?

Vietnam's deficit jumped $54.7 billion to $178.2 billion. Exports edged up $2.6 billion to $15.7 billion while imports surged $57.3 billion to $193.8 billion.

China was the outlier. The deficit actually narrowed by $93.4 billion to $202.1 billion. Exports fell $36.9 billion to $106.3 billion, and imports dropped $130.4 billion to $308.4 billion.

The Front-Loading Story

Italian economist Riccardo Trezzi offered a clearer picture of what actually happened. "In recent weeks, some political and academic commentators have celebrated the decline in the trade deficit and linked it to tariffs. However, the latest data — including today's release — confirm the opposite narrative. The deficit surged in early 2025 as firms front-loaded imports ahead of the tariffs," he explained on social media platform X.

The pattern makes sense once you think about it. Companies saw tariffs coming and rushed to get goods into the country before the higher costs kicked in. That inflated imports early in the year and widened the deficit.

Then, as businesses worked through those stockpiles, imports cooled and the deficit narrowed temporarily. Inventories sat elevated for months.

By year-end, those inventories were depleted and the deficit snapped back to where it started.

For investors who were betting on tariffs to structurally reset America's economic relationship with the world, the data tells a different story. Trade flows got reshuffled, supply chains adjusted, and certain bilateral balances shifted. But the nearly $1 trillion imbalance? Still very much intact.