Photo by Samuel Wölfl
The US trade deficit narrowed in June to its smallest level since September 2023, as companies scaled back imports following a significant surge earlier in the year.
According to data from the Commerce Department released on Tuesday, the goods and services trade gap shrank by 16% compared to the previous month, reaching $60.2 billion. This result was slightly better than the $61 billion deficit forecasted by economists in a Bloomberg survey.
The drop in the trade deficit was driven by a 3.7% decline in the value of imports, which fell to their lowest level since March 2024. Exports also contracted, but at a lesser rate. These figures are not adjusted for inflation. Imports of consumer goods saw a significant dip, reaching their lowest point since September 2020. Additionally, imports of industrial supplies and motor vehicles decreased, while inbound shipments of capital equipment rose.
The data suggests that US companies had likely rushed to secure goods earlier in the year ahead of President Donald Trump’s announcement of sweeping tariffs on April 2. Although many of those tariffs were later postponed or reduced, the initial rush to import goods may have created a temporary surge. With the tariff threat now eased, companies had more flexibility in securing foreign-made products.
This report also aligns with the government’s initial estimate of 3% annualized growth for the US economy in the second quarter, published last week. Notably, net exports contributed 5 percentage points to GDP growth, a strong recovery after subtracting the largest deficit on record in the first quarter. However, beneath the surface, the economy shows signs of losing momentum.
In a related development, the White House last week introduced adjusted reciprocal tariff rates for countries that failed to reach trade agreements with the US by an August 1 deadline. Additionally, President Trump is expected to announce new tariffs in the coming weeks targeting pharmaceuticals, semiconductors, critical minerals, and other key industrial products, which could further disrupt international trade.
The June data also revealed some key trends in the bilateral trade balances. The trade deficit with China narrowed to its lowest level since data collection began in 2009, as imports from the country decreased. Similarly, the deficit with Mexico also shrank after hitting a record high in May, while the goods trade deficit with Canada dropped to its smallest level since the end of 2020.
What Bloomberg Economics Says…
“Data shows that the significant spike in goods imports by US companies ahead of President Trump’s tariffs fully reversed in the second quarter. Looking ahead, trade will likely remain volatile and susceptible to the impact of future tariff measures,” said Eliza Winger, an economist at Bloomberg Economics.
On an inflation-adjusted basis, the merchandise trade deficit fell to $84.6 billion in June after hitting a record earlier in the year.
President Trump’s trade policies continue to focus on achieving greater fairness in bilateral commerce, encouraging foreign investment in the US, boosting domestic production, and enhancing national industrial security. He also views tariffs as a way to generate revenue for the government, contributing to the administration’s broader economic agenda.
