Trade deficit narrows

December 11, 2025

The US trade deficit narrowed by 10.9% in September to $52.8 billion, the second month in a row that the deficit declined. It now stands at the lowest level since April 2020. Unlike previous months of narrowing, September's change was driven by higher exports. A 3.0% rise in exports more than offset a 0.6% increase in imports.

The headline data masks the GDP implications of trade because they do not account for changes in prices or nonmonetary gold (not counted toward the GDP calculation). Nonmonetary gold made up nearly 70% of the rise in exports and accounted for over 100% of the rise in imports. That translates to a narrower deficit of just 3.2% for the purposes of GDP, not the over 10% reported in the headline.

Imports increased $1.9 billion overall, with imports of nonmonetary gold accounting for all of that. The subcomponents were mixed; we saw a large increase in consumer goods imports that offset declines in all other categories. Consumer imports rose $10.2 billion. That was driven by a $12.9 billion increase in pharmaceutical preparations. The pharmaceutical industry has been undergoing changes in its tariff structure from August through October; that could be driving the increase,. Other consumer goods mostly showed small declines, notably in cell phones and household appliances. Imports of services were essentially flat as an increase in transport imports (driven by higher airfares abroad and not necessarily demand) offset a decline in other travel services.

Capital goods imports showed the largest declines, down $5.6 billion; imports of computers bucked the AI-driven import trend and declined $4.7 billion, along with electric apparatus imports down $1.5 billion. Few categories showed significant increases, with the exception of computer accessories, which may be related to AI, civilian aircraft and semiconductors.

Automotive vehicles and parts declined $1.4 billion showing broad-based weakness, while industrial supplies outside of nonmonetary gold fell, driven by a $1.3 billion decline in crude oil imports. The vehicle makers have absorbed much of the increase in tariffs due to the already high level of vehicle prices. The average price of a new vehicle hit a psychological threshold of $50,000 in recent months. It is unclear how long auto makers can absorb the blow to margins. Layoffs in the sector are up.

Exports increased $8.4 billion overall, but nonmonetary gold made up $6.1 billion of the increase. Food, petroleum-related products and pharmaceuticals offset export weakness in the automotive sector, computers and semiconductors.

Exports of services, where the US holds a surplus, declined as travel-related services received fewer visitors from abroad. That was partially offset by an increase in financial services exports. Congress has a bill that aims to levy an excise tax on offshored service sector workers. That would make us more vulnerable to retaliation in an area where we are running a surplus.

Results were more mixed by trading partner than we have seen in previous months. Trade deficits widened with Canada and Mexico as importers continued to utilize USMCA exemptions. That will be a big factor next year during the 2026 renegotiation of the multilateral trade pact; a sunset clause could be triggered if the trade pact with our closest neighbors is not reapproved.

The trade deficit with the EU widened, mostly from Ireland and likely due to changes in pharmaceutical imports; Ireland is a major producer. The surplus with South/Central America shrank after expanding in August.

The trade surplus with Switzerland expanded as we exported more nonmonetary gold than we imported. Trade deficits narrowed with Pacific Rim countries, driven by smaller deficits with China, Taiwan, Japan and South Korea. The trade deficit with India also narrowed. India is one of the major targets on the excise tariff proposed for service sector imports.