The US trade deficit widened to an all-time high in January, driven by a surge in imports ahead of new tariffs. According to the Commerce Department’s Bureau of Economic Analysis (BEA), the trade gap expanded by 34.0% to $131.4 billion from a revised $98.1 billion in December. This marked the largest percentage increase since March 2015 and exceeded economists’ expectations of $127.4 billion.
Surge in imports amid tariff concerns
Imports soared 10.0% to $401.2 billion, the highest increase since July 2020. Goods imports rose by a record 12.3% to $329.5 billion, largely driven by a $23.1 billion rise in industrial supplies and materials, notably finished metal shapes, likely gold. Consumer goods imports also saw a $6.0 billion rise, fueled by pharmaceutical products, cell phones, and household items. Capital goods imports increased by $4.6 billion due to higher purchases of computers and telecommunications equipment.
While imports of services increased slightly by $0.4 billion to $71.7 billion, driven by intellectual property and business services, travel service imports declined.
Modest growth in exports
Exports grew by 1.2% to $269.8 billion. Goods exports rose 1.6% to $172.8 billion, with a $4.2 billion increase in capital goods, including civilian aircraft, semiconductors, and computers. Consumer goods exports increased by $1.7 billion, mainly due to pharmaceutical preparations and jewelry. However, food exports fell by $1.0 billion, largely due to a decline in soybean shipments.
Economic impact
The growing trade deficit, coupled with a decline in consumer spending, has raised concerns about a potential contraction in GDP for the first quarter. The Atlanta Federal Reserve currently projects a 2.8% annualized decline in GDP, following a 2.3% growth rate in the previous quarter.
Despite these concerns, some economists believe moderate growth remains possible, as much of the import surge was attributed to gold purchases, which do not significantly impact national economic activity. Goldman Sachs noted that most gold imports fluctuate based on market demand rather than domestic consumption, and thus are excluded from national accounts.
With President Trump’s newly imposed tariffs on Mexican, Canadian, and Chinese goods, the trade landscape remains uncertain. Moving forward, analysts will closely watch whether these trade policies lead to further economic disruptions.
(With Reuters inputs)