The U.S. trade deficit saw a significant reduction in April, marked by an unprecedented drop in imports. This decline can be attributed to businesses tapering their rush to import goods before the imposition of tariffs, a move that could ultimately stimulate economic growth in the current quarter.
According to the Commerce Department’s Bureau of Economic Analysis, the trade deficit narrowed sharply by 55.5%, settling at $61.6 billion, the lowest levels recorded since September 2023. Additionally, the trade deficit for March was revised to reflect a wide gap of $138.3 billion, adjusting from an earlier estimate of $140.5 billion.
Economists had anticipated a narrowing of the deficit to around $70.0 billion. The deficit in goods trade also decreased markedly by 46.2%, reaching $87.4 billion, the lowest since October 2023.
The previous quarter’s growth rate of gross domestic product had fallen largely due to the front-loading of goods to avoid tariffs. The contraction in the trade deficit could, in theory, contribute positively to GDP growth, although this will heavily depend on inventory levels.
In April, total imports plummeted by a record 16.3% to $351.0 billion, with goods imports specifically declining by 19.9% to $277.9 billion. Notably, consumer goods imports dropped by $33 billion, predominantly influenced by a fall in pharmaceutical imports from Ireland.
Trade in industrial supplies, particularly metals, also saw a substantial decrease. Despite these drops, exports increased by 3.0% to a record high of $289.4 billion, largely propelled by industrial supplies and materials.
The U.S. achieved a record surplus in goods trade relationships with Hong Kong, the United Kingdom, and Switzerland while facing significant deficits with Vietnam, Taiwan, and Thailand.