The AI boom just blew a hole in Trump’s trade war — SkimNews
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- US trade deficit widened to $88.6 billion in July (largest since March 2025), driven by AI-related tech and semiconductor imports — not, as Trump is likely to claim, by collapsing competitiveness.
- The trade gap jumped 24.4% in a single month, with capital-goods imports hitting a record $140.3 billion, fueled by computers, components, and semiconductors feeding domestic AI buildout.
- Trump has cycled through three legal workarounds for tariffs in under a year: the Supreme Court blocked IEEPA in February, Section 122 expired in late July, and he pivoted to Section 301 to impose 10–12.5% tariffs on more than 60 countries.
- Tariff fallout is already visible: 30-year Treasury yields sit at 20-year highs, and the Federal Reserve is weighing a rate hike as soon as this month.
- Canada is now in the crosshairs despite Americans having "zero interest in picking a fight" with it, per Eurasia Group's Ian Bremmer — while Raymond James's Edward Mills says "the US has not yet reached peak tariff."
- Biden borrowed the tariff playbook too, quadrupling Chinese EV duties to 100% in 2024 and raising tariffs on batteries, solar cells, cranes, and steel.
- Wall Street is betting Trump will ultimately back down: his actual 30%-range tariffs on China are a fraction of the 100%-plus levies he originally threatened.
Why it matters: Washington's likely reflex — more tariffs to close the $88.6 billion gap — misdiagnoses the problem: the deficit reflects aggressive AI investment, not trade failure. The wrong prescription is already producing 20-year-high Treasury yields, a possible Fed rate hike, and inflation pressure that threatens the economic legacy tariffs were meant to protect.
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