AI infrastructure boom fuels import surge

July 7, 2026

The US trade deficit surged 42.2% in May to $77.6 billion from a downwardly revised $54.6 billion in April. While AI infrastructure expansion drove strong import growth in semiconductors and computer accessories, exports of AI-related goods declined.

The trade deficit has worsened 16.2% from a year ago following the whiplash of Liberation Day tariffs. The deficit remains at a similar level to the early 2020s.  

The Supreme Court decision in February that found emergency powers tariffs unconstitutional initially led importers to stock up under the lower Section 122 tariff rate of 10%. That decreased the tariff rate for some countries, incentivizing firms to purchase goods ahead of possible tariff hikes. 

The Administration has proposed replacing expiring Section 122 tariffs with Section 301 tariffs in late July. That should return the effective tariff rate close to its 2025 peak of 11%. Tariff mitigation efforts and industry-specific exemptions will lower that rate over the next two years, although enforcement at the border has intensified.

The Administration let the existing USMCA lapse on July 1, turning the most consequential US trade agreement into a “zombie.” This adds to trade policy uncertainty. Canada and Mexico have already suffered from weak investment due to uncertainty regarding the durability of the agreement. 

Some $2 trillion in trade is covered by the agreement, which was designed to boost competition for domestic vehicle producers. Currently, only Mexico and the US are at the bargaining table adding fuel to the uncertainty fire. 

Exports dropped 3.2% in May, while imports increased 3.3%. After adjusting for inflation, the real goods deficit increased 18.7%, less than the headline indicates. 

As we have seen in recent months, gold for investment purposes has become a key component of changes in the trade deficit. Exports of nonmonetary gold fell $6.2 billion from April, while imports were unchanged.  Leaving out nonmonetary gold, the trade deficit jumped 18.9%, which is still stunning and a drag on GDP growth. 

Imports excluding gold increased $12.1 billion in May with all categories increasing. Consumer goods, led by pharmaceutical preparations and cell phones, increased $3.5 billion. Consumer electronics prices are now rising instead of falling as they have for decades in response to the near insatiable demand for memory chips for data centers.

Industrial supplies climbed $3.1 billion on crude oil. The closure of the Strait of Hormuz was ongoing when the May data was gathered. Fertilizer imports declined a second month in a row as a third of global seaborne fertilizer trade was blocked in the strait.

Imports of automotive vehicles, parts and engines grew $2.2 billion, driven by passenger cars and other auto parts. Capital goods imports set a new record, moving up $1.1 billion on broad-based gains led by inputs to the AI build out, such as computer accessories and semiconductors. Computers themselves plummeted the second most on record. Foods, feeds and beverages turned in its strongest month since early 2024, growing $0.8 billion.

Exports slipped $5.4 billion after accounting for nonmonetary gold. Only foods, feeds and beverages increased, increasing a modest $0.6 billion on soybeans. Industrial supplies fell $5.5 billion, but after adjusting for gold, turned positive. Precious metals and natural gas were a drag. Crude oil exports jumped $2 billion, the third highest on record. The previous two months set the first two records.  

Capital goods fell $3.5 billion, pulled down by computers and computer accessories. Semiconductor exports dropped for the third straight month. Consumer goods slipped $2.1 billion led by pharmaceutical preparations and gem diamonds. The latter decreased the second most on record. Autos, parts and engines nearly broke even with fewer trucks, buses and passenger cars coming into the country. 

The goods deficit with Mexico increased $5.3 billion to $20.1 billion due to strong imports and lower exports. Data center components have been coming in from Mexico as well as Asia. The deficit with Mexico is now at a record high. The deficit with Canada expanded $1.7 billion on higher imports. The deficit with China widened by $4 billion on a jump in imports but sits at about one-third of its October 2018 high.