July Trade Deficit Soared on Rush to Beat Tariffs
By Reuters | 04 Sep, 2025

Uncertainty as to just how high Trump intended to raise tariffs on export powers China, Taiwan, S. Korea and Japan spurred consumers and businesses to stock up on imports.

The U.S. trade deficit widened sharply in July as record inflows of capital and other goods boosted imports, a trend that if sustained could see trade subtracting from gross domestic product in the third quarter.

The trade gap ballooned 32.5% to $78.3 billion, the Commerce Department's Bureau of Economic Analysis said on Thursday. Economists polled by Reuters had forecast the deficit rising to $75.7 billion.

President Donald Trump's aggressive tariffs have caused wild swings in imports and ultimately the trade deficit, distorting the overall economic picture. A U.S. appeals court ruled last Friday that most of Trump's duties, which have boosted the nation's average tariff rate to the highest level since 1934, were illegal, creating more uncertainty for businesses.

Trade subtracted a record 4.61 percentage points from GDP in the first quarter before sharply reversing and adding 4.95 percentage points in the April-June quarter, also the largest contribution on record. 

The economy grew at a 3.3% annualized rate last quarter after contracting at a 0.5% pace in the first three months of the year. The Atlanta Federal Reserve is currently forecasting GDP increasing at a 3.0% rate this quarter.

Imports soared 5.9% to $358.8 billion. Goods imports vaulted 6.9% to $283.3 billion. They were boosted by a $12.5 billion surge in imports of industrial supplies and materials, which reflected a $9.6 billion increase in nonmonetary gold. 

Petroleum imports were, however, the lowest since April 2021.

Capital goods imports increased $4.7 billion to a record $96.2 billion, driven by computers, telecommunications equipment and other industrial machinery. But semiconductor imports fell $0.8 billion. Imports of consumer goods increased $1.3 billion, but pharmaceutical preparations imports decreased $1.1 billion.

Imports of motor vehicles, parts and engines decreased $1.4 billion, pulled down by declines in imports of trucks, buses and passenger cars.

Exports rose 0.3% to $280.5 billion. Exports of goods edged up 0.1% to $179.4 billion. Capital goods exports increased $0.6 billion to a record $59.9 billion, lifted by shipments of computer accessories and civilian aircraft. Exports of excavating machinery fell $1.5 billion.

Exports of motor vehicles, parts and engines increased $0.3 billion. Industrial supplies and materials exports decreased $0.2 billion, weighed down by a $2.5 billion decline in shipments of finished metal shapes. Nonmonetary gold exports increased $2.9 billion.

The goods trade deficit widened 21.2% to $103.9 billion. The goods trade deficit with China increased $5.3 billion to $14.7 billion. The nation also had goods trade deficits with among others Mexico, Vietnam, the European Union, Switzerland, India, South Korea and Japan. 

Imports of services increased $1.7 billion to a record $75.5 billion in July, reflecting rises in transport, travel and other business services. 

Exports of services increased $0.6 billion to an all-time high of $101.0 billion. They were boosted by increases in transport, charges for the use of intellectual property as well as government goods and services. 

Travel services, however, dropped $0.3 billion amid the White House's immigration crackdown. 

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)