Trade deficit soars to record high

May 6, 2025

The US trade deficit widened to $140.5 billion in March, a 14% increase from February; that is the largest deficit ever on record. Imports rose more than exports. The deficit increased 92.6% year-over-year; imports surged 23.3% while exports rose 5.2%.

Importers continued to stockpile goods to get ahead of tariffs. Partial exemptions for autos and auto parts were granted; the higher reciprocal rates announced on April 2 were postponed for 90 days on all countries except for China. However, an array of other tariffs remains in place, resulting in the highest effective tariff rate in the United States in over a century. Investigations are underway for additional sectoral tariffs, affecting pharmaceuticals, semiconductors, copper and lumber.

Goods imports rose by $17.8 billion while services imports were flat. Consumer goods soared $22.5 billion, driven by a gain of $20.9 billion in pharmaceutical preparations. Imports rose for computer accessories, automobiles, household goods and furniture. Those increases all reflect stockpiling in advance of tariffs. Nonmonetary gold, which does not figure into GDP calculations, fell. Imports for cell phones declined in March after surging in February.

Imports of industrial supplies and materials fell $10.7 billion in March. That includes a $10.3 billion decline in finished metal shapes; that encompasses steel and aluminum. The administration placed 25% tariffs on steel and aluminum on March 12 using Section 232. The decrease highlights the dynamics of tariffs: They reduce demand for imports, which results in less revenue earned. Stated tariff goals of import substitution and revenue generation are often at odds.

Exports were nearly flat in March. Industrial supplies and materials exports grew by $2.2 billion on nonmonetary gold and natural gas exports. Soybeans exports increased by $762 million while passenger cars gained $911 million. Capital goods exports decreased by $1.5 billion overall as civilian aircraft fell $1.8 billion. Helping offset that loss was a gain of $726 million in computer accessories. Inbound travel from abroad, which is counted as an export, fell. Tourism to the US has declined in recent months, despite the weakening dollar making travel here relatively less expensive.

Trade deficits rose with most of our major trade partners. These include the European Union, Mexico, Vietnam, Japan, Taiwan, South Korea and India. The deficit with China fell in March but still approached $18 billion.