America’s current account deficit in 2025 was $1.18tn—the same as 2024. The most protectionist turn in living memory did not shrink it, a predictable accounting result. A deficit is the gap between investment and saving; tariffs alter neither. Tax cuts widened the budget deficit, offsetting tariff gains.

For years, America’s huge deficits were partially offset by a massive net investment income, keeping its NIIP healthy. But in 2024, for the first time in at least half a century, US net investment income turned negative, hovering around zero in 2025. Critics said this surplus was a mirage of tax planning that would vanish when rates normalised.

Since 1976, the US has accumulated $17tn in deficits; its official NIIP is minus $21.9tn. Yet the US paid only $50bn on those deficits last year—about 0.3 percent. A country owing 70 percent of its output and servicing debt at 0.3 percent has not lost privilege; it has simply stopped earning to borrow.

The July 31 tariffs on patented pharmaceuticals target the ‘dark matter’ of US knowledge income that returns via Irish subsidiaries. They are effectively a tax on foreign earnings of US firms. Redomiciling IP to America would shrink the trade deficit without moving factories. Tariffs did not shift the shadow; the new ones aim at its source.