Background on the United States and its Trade Deficits
The United States, under the guidance of the Office of the United States Trade Representative (USTR), has announced its intention to take measures to reduce trade deficits in goods outside the rules of the World Trade Organization (WTO). This decision was communicated to the WTO General Council in a written submission in December 2025.
Impact on Mexico and Other Countries
Mexico, among other countries, may experience consequences due to its significant trade surplus with the United States. From January to October 2025, Mexico’s trade surplus with the US reached a record high of 164.816 billion dollars, marking a 16.4% increase and the second-largest positive balance in product trade with the US, just behind China’s 175.400 billion dollars surplus.
Historical Context and USTR’s Argument
The USTR’s written communication to the WTO highlights that for decades, numerous countries—including close US partners—have sought artificial trade advantages through subsidies, wage suppression, monetary policy manipulation, and labor and environmental abuses.
In 2024, the US trade deficit in goods amounted to an unprecedented and unsustainable 1.2 trillion dollars, which cannot be reasonably explained as a result of genuine comparative advantage.
USTR’s Proposed Actions and Response to Critics
In response, countries with chronic trade surpluses inconsistently claim that trade deficits are unimportant while refusing to address the distortive practices generating them.
The USTR argues that, in a well-functioning trade environment, massive and persistent imbalances would be impossible; a persistent surplus of one country is prima facie evidence that it is externalizing distortive practices.
The USTR has initiated unilateral action, stating that the US is addressing these practices and welcomes countries with similar views to join. However, the WTO is not a viable forum for addressing these imbalances since countries with chronic surpluses would have to accept rules that deprive them of their current advantages.
Jamieson Greer’s Call for a New International Trade System
At the World Economic Forum in Davos, Switzerland, Jamieson Greer, the head of the USTR, urged countries to follow the US example and establish a new international trade system that “incorporates the necessary flexibility to address economic vulnerabilities, avoid exposure to economic coercion, and capitalize on productivity gains in our domestic markets.”
Greer emphasized that such a system must confront structural imbalances directly and make long-term balance a cornerstone of international economic policy, benefiting everyone, not just the US.
Key Questions and Answers
- What is the main issue? The United States aims to reduce trade deficits in goods beyond WTO rules.
- Which countries may be affected? Mexico, with its significant trade surplus with the US, could experience consequences.
- Why is the US taking these measures? The US argues that distortive practices by countries with chronic trade surpluses have led to unsustainable trade deficits.
- What is the proposed solution? The USTR advocates for a new international trade system that addresses imbalances and incorporates necessary flexibility.
- What is Jamieson Greer’s role? As the head of the USTR, Greer has called for a new international trade system at the World Economic Forum in Davos.
