President Donald Trump has long sought to tackle the country's overall trade deficit.The combined goods and services trade deficit hit $918.4 billion in 2024, a big increase from 2023.There hasn't been a trade surplus in the United States since 1975.The US Department of Commerce says the combined goods and services trade deficit stretched to a gargantuan $918.4 billion in 2024.That's a 17% increase compared to 2023, although it's a little smaller than 2022's record-high of $944.8 billion.Tackling trade imbalances will likely be a key part of President Donald Trump's second-term agenda.One of the president's first official acts was to sign an executive order calling for an "America First Trade Policy," emphasizing economic investment and reducing the trade deficit.Here's why the trade deficit is important and the role Trump's tariffs play.A trade imbalanceA trade deficit occurs when a country imports more than it exports, which has been the case in the United States for decades. The United States hasn't had a trade surplus since 1975 exactly 50 years ago.The US trade deficit on goods alone was a record $1.2 trillion in 2024, and there was a trade surplus on services of about $293 billion.Trade deficits can benefit the economy by allowing countries to consume more products than they produce. Trade deficits that are too big, however, can hurt domestic companies by potentially driving increased competition for less expensive foreign imports. Large trade deficits can also potentially lower a country's gross domestic product.The strength of the US dollar means imports are slightly cheaper for American consumers, which is good. But it also means exports are more costly for non-US consumers. That can make it more difficult for US exporters to sell their products.How Trump plans to balance the trade deficitThe persistent trade deficit is something Trump has long sought to reverse.Before Trump took office, he suggested a universal 10% to 20% tariff on every country to among other things reduce the number of foreign imports and bring down the trade deficit. US President Donald Trump and Japanese Prime Minister Shigeru Ishiba discuss trade policy at the White House. AP Photo/Alex Brandon On Friday, Trump said he'd announce "reciprocal" tariffs on multiple countries in the coming week.During a Friday meeting with Prime Minister Shigeru Ishiba of Japan at the White House, Trump said he wanted to cut the US trade deficit with Japan, which in 2024 hit $68.5 billion.Trump didn't rule out future tariffs for Japan. However, Ishiba was highly complimentary of the US president during their meeting, and Trump said he didn't believe Japan and the US would "have any problem whatsoever."Trump levied 25% tariffs on Canada and Mexico and 10% tariffs on China earlier this month. Mexico and Canada have since struck deals with the Trump administration to pause the tariffs through at least early March.China responded with its own 10% tariff on select US imports including crude oil, agricultural machinery, and pickup trucks.Part of Trump's rationale for tariffs was his frustration with illegal immigration and border security, as well as the flow of illicit drugs into the United States.Trump also cited the elevated trade deficit."They have to balance out their trade, No. 1," he told reporters at Maryland's Joint Base Andrews, referring to how Canada and Mexico could avoid tariffs. "We have deficits with almost every country not every country, but almost and we're going to change it."Last year, the US trade deficit with China was $295 billion, a major decline from the record $418 billion gap set in 2018 during Trump's first term.The trade deficit with Mexico, however, grew from $78 billion in 2018 to about $172 billion in 2024.The United States had a $63 billion trade deficit with Canada last year, but if oil and gas are left out of the equation, the United States would have a $30 billion trade surplus with its northern neighbor, according to MarketWatch.