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• US trade deficit expands sharply as imports surge

  • Reuters, WASHINGTON
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  The US trade deficit widened sharply in December amid a surge in imports, and the goods shortfall last year was the highest on record, despite US President Donald Trump’s tariffs on foreign manufactured merchandise.

  The second straight monthly deterioration in the trade deficit reported by the US Department of Commerce on Thursday suggested that trade made little or no contribution to GDP in the fourth quarter. However, most of the imports were capital goods, which should support business investment and keep expectations for strong economic growth intact.

  Trump last year unleashed a barrage of tariffs against trading partners with the aim, among other things, to address trade imbalances and protect US industries, but the punitive duties have not yielded a manufacturing renaissance, with factory employment declining by 83,000 jobs last month compared with a year earlier.

  

  People shop at a Costco store in the Staten Island borough of New York City on Jan. 16.

  Photo: Reuters

  “There just isn’t any evidence out there in the economic research literature to suggest that tariffs have materially impacted trade deficits historically when countries have implemented them,” Peterson Institute for International Economics senior fellow Chad Bown said.

  The trade deficit last month ballooned 32.6 percent to a five-month high of US$70.3 billion, the US Bureau of Economic Analysis and Census Bureau said. Economists polled by Reuters forecast it would contract to US$55.5 billion.

  The full-year trade deficit narrowed 0.2 percent to US$901.5 billion.

  The goods trade gap widened 2.1 percent to an all-time high of US$1.24 trillion. Record goods trade deficits were reported with Taiwan, Mexico, Vietnam, Ireland, Thailand and India. The goods trade deficit with China shrank to US$202.1 billion from US$295.5 billion in 2024.

  Imports increased 3.6 percent to US$357.6 billion in December. Goods imports surged 3.8 percent to US$280.2 billion, boosted by a US$7 billion increase in industrial supplies and materials, mostly non-monetary gold, copper and crude oil. Capital goods imports increased US$5.6 billion, lifted by computer accessories and telecommunications equipment. That rise is likely related to the construction of data centers to support artificial intelligence.

  However, consumer goods imports fell, pulled down by pharmaceutical preparations. There have been large swings in imports of pharmaceutical preparations because of tariffs. Goods imports increased 4.3 percent to a record US$3.44 trillion last year. There were record imports from 46 countries last year, led by Mexico, Taiwan and Vietnam. Some goods from Taiwan and Vietnam have been exempted from tariffs. The rise in imports last year was almost across the board, led by capital goods, mostly computers, computer accessories and telecommunications equipment. Imports of motor vehicles, parts and engines fell.

  Exports fell 1.7 percent to US$287.3 billion in December. Goods exports dropped 2.9 percent to US$180.8 billion, weighed down by an US$8.7 billion decline in industrial supplies and materials, mostly non-monetary gold. However, capital goods exports increased, boosted by semiconductors.

  For the full year, exports of goods increased 5.7 percent to an all-time high of US$2.2 trillion, boosted by capital goods, industrial supplies and materials, other goods as well as consumer goods.

  The goods trade deficit widened 18.8 percent to US$99.3 billion in December. Imports of services increased US$2.0 billion to US$77.4 billion amid gains in transport and travel services. Exports of services increased US$0.5 billion to US$106.5 billion.

  The larger-than-expected trade deficit prompted the Atlanta Federal Reserve to cut its fourth-quarter GDP growth estimate to a 3.0 percent annualized rate from a 3.6 percent pace earlier.

  “But strong imports should also imply strength in details like inventories or business investment,” Citigroup economist Veronica Clark said. “Surging computer imports in particular should correspond with stronger business equipment investment and could remain strong due to AI-related demand.”
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