U.S. Trade Deficit Widens Sharply in December

By Lucia Mutikani
WASHINGTON (Reuters) – The U.S. trade deficit sharply widened in December as imports surged to a record high due to tariff threats.

The report from the Commerce Department revealed significant deficits with major trade partners like China, Mexico, and Canada. President Trump’s administration has targeted these countries for potential broad or additional tariffs. On Monday, Trump suspended a 25% tariff on goods from Mexico and Canada until next month. An additional 10% tariff on Chinese goods took effect on Tuesday.

Despite tariffs being positioned as related to immigration and drug control, the rising deficit could bolster arguments for a protectionist trade strategy. Thomas Ryan, North America economist at Capital Economics, noted, “The surge in imports appears largely driven by businesses rushing orders ahead of potential tariffs, a trend that is unlikely to reverse soon.”

The trade gap increased by 24.7% to $98.4 billion, marking the highest level since March 2022 and the second-largest deficit on record. Imports rose 3.5% to an all-time high of $364.9 billion. Goods imports increased by 4.0% to $293.1 billion, driven by industrial supplies and a significant jump in finished metal shapes, mainly sourced from Switzerland.

However, some economists doubt that front-loading of imports solely explains the surge in the trade deficit, given Switzerland’s minimal presence on Trump’s tariff watchlist.

A survey from the Institute for Supply Management (ISM) indicated concerns about higher prices and shortages from tariffs, particularly from professional services. The ISM’s non-manufacturing PMI also slipped, reflecting broader market worries.

Overall, while capital goods imports rose, exports fell by 2.6%, with a notable decline in consumer goods and industrial supplies.

December’s data aligned with the Bureau of Economic Analysis’s advance GDP estimate, suggesting little risk of a major growth revision. The economy grew at a 2.3% annualized rate in the quarter, primarily affected by inventory changes.

Key Highlights

• Trade deficit rose to $98.4 billion, highest since March 2022.
• Record imports and tariff concerns prompted rush in business purchases.
• Services imports and exports reached all-time highs, with mixed impacts on trade balance.

This report reflects an evolving landscape in U.S. trade and highlights ongoing economic strategies amid tariff implications.