US trade deficit in goods widens to new record in 2025

The US goods deficit stood at $1.24 trillion for all of last year, widening slightly from 2024's level to its biggest in Commerce Department figures dating back to 1960.

But the trade gap in goods with China narrowed for the year, as US imports from the world's second-biggest economy dropped by 30 percent.

When both goods and services were considered, the overall US trade deficit for 2025 narrowed to $901.5 billion, from $903.5 billion in 2024.

This was still the third-widest deficit on record.

In the month of December, the overall deficit grew more than expected by 32.6 percent to $70.3 billion, as exports fell and imports climbed.

Trade flows involving the world's biggest economy were heavily swayed in 2025 as Trump slapped fresh tariffs on goods from virtually all trading partners after returning to the presidency, as part of a push to reduce the US trade gap.

His moves brought the average effective tariff rate to its highest since the 1930s.
AI, frontloading
Chad Bown of the Peterson Institute for International Economics told reporters Thursday that the uptick in imports was likely due in part to the United States' artificial intelligence build-out.

This covers high-tech goods like advanced semiconductors, primarily manufactured in Taiwan, that eventually go towards data centers.

Another factor could be that Trump's waves of country-specific tariffs last year contained significant exemptions, such as for electronic products like smartphones.

The shift in trade flows with China came as Trump engaged in tit-for-tat tariff escalations with Beijing in April. Tensions between both countries have since cooled.

But overall import figures likely reflect changes in companies' sourcing strategies, turning to countries like Vietnam for example, as the US-China relationship remained turbulent.

Meanwhile, "imports were a lot stronger at the beginning of the year than they were toward the end of the year," Bown said.

Some of this was probably due to companies "front-running to try to beat the tariffs" before they took effect, he added.
'Roller-coaster ride'
"Trade took a roller-coaster ride in 2025 as tariffs jolted flows, mostly on the import side," said Nationwide financial market economist Oren Klachkin in a note.

"But after all the tariff headlines and swings in the data, the trade deficit barely budged in 2025, decreasing only $2.1 billion, or 0.2 percent, on an annual basis," he added.

Still, he noted significant moves under the surface.

The trade deficit with China fell to its lowest since the early 2000s while gaps with Taiwan and Mexico reached a record high, he said.

"With the peak tariff drag now likely behind us, we expect trade to settle into a more predictable rhythm," said Klachkin.

Trump has been quick to attribute US economic growth and other achievements to his sweeping tariffs, saying on social media last month that they have "rescued our economy and national security."

But a New York Federal Reserve paper noted in February that nearly 90 percent of the tariffs' economic burden fell on US firms and consumers.

This underscores the Trump administration's challenges ahead to convince American households of his economic record, as they grapple with affordability.

In December, exports of industrial supplies including nonmonetary gold dropped, while imports in the same category rose for the month.

US imports of capital goods like computer accessories and telecommunications equipment picked up in the month.