US Trade Deficit Rockets To Record High In January Amidst Tariff Uncertainty

The merchandise-trade deficit with China also widened. The value of goods imported from China was the highest since September 2022.

Things are not getting off to a great start for the Trump administration as one of the key things he campaigned on, lowering the trade deficit, rose to a new record high in January as the President’s tariff threats have caused a lot of commotion and confusion for foreign and domestic companies.

Bloomberg reported (excerpts):

The U.S. trade deficit widened to a record in January as companies scrambled to secure goods from overseas before President Donald Trump imposed tariffs on America’s largest trading partners.

The gap in goods and services trade widened 34% from the prior month to $131.4 billion, Commerce Department data showed Thursday. The deficit was larger than all but one estimate in a Bloomberg survey of economists.

The value of imports rose 10% to a record $401.2 billion, while exports increased 1.2%. The figures aren’t adjusted for inflation.

Canada’s trade surplus with the U.S. jumped to a record at the start of the year, driven by exports of cars, auto parts and oil, separate data from Statistics Canada showed Thursday.

The January flurry of imports was broad and included a surge in inbound shipments of industrial supplies and materials. Within that category, imports of finished metal shapes that include gold bullion jumped $20.5 billion, marking a second month of steep increases.

Much of that increase in gold imports came from Switzerland where the U.S. trade deficit widened sharply. The nearly $23 billion gap during the month was second to only China.

Goods and services trade, excluding the impact of gold imports, may weigh on first-quarter gross domestic product after contributing slightly to growth in the closing months of 2024.

While imports are generally a drag on GDP, the Bureau of Economic Analysis excludes gold that isn’t consumed or used in the production of other goods. Since most of the gold imports are part of peculiar trading in the commodities market, they won’t detract from growth.

Imports of consumer goods climbed 8.3%, led by pharmaceuticals and cell phones, and an increase in inbound shipments of capital equipment was driven by computers and accessories.

The US report showed the goods-trade shortfall with Canada widened to a record $11.3 billion on a seasonally adjusted basis, while the deficit with Mexico grew from a month earlier.

The merchandise-trade deficit with China also widened. The value of goods imported from China was the highest since September 2022.

MarketWatch also pointed out:

The exploding trade deficit will subtract from gross domestic product because it means the U.S. is buying relatively more goods and services from foreign suppliers instead of American producers. As a result of the steep rise in the deficit, many economists are now forecasting a contraction in the first quarter.

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AUTHOR COMMENTARY

Proverbs 22:16 He that oppresseth the poor to increase his riches, and he that giveth to the rich, shall surely come to want.

In fairness, this latest headline is not “Trump’s fault,” as this is a lag effect from the Biden administration carrying over, but it certainly does not bode well for him either as his administration will not have much in the way of closing this gap, in my view. Him flip-flopping on the tariffs won’t help.

Keep in mind that by the time Trump left office and Biden took over, the trade deficit had hit an all-time record high (at the time, it was since surpassed under Biden); but the trade deficit was rising under Trump before 2020, as I reported back in 2021.

For many years now, approximately 70% of the U.S. is consumer-based: we hardly manufacture anything. Until that changes, I don’t see how the trade deficit can ever be fixed.

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[7] Who goeth a warfare any time at his own charges? who planteth a vineyard, and eateth not of the fruit thereof? or who feedeth a flock, and eateth not of the milk of the flock? [8] Say I these things as a man? or saith not the law the same also? [9] For it is written in the law of Moses, Thou shalt not muzzle the mouth of the ox that treadeth out the corn. Doth God take care for oxen? [10] Or saith he it altogether for our sakes? For our sakes, no doubt, this is written: that he that ploweth should plow in hope; and that he that thresheth in hope should be partaker of his hope. (1 Corinthians 9:7-10).

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