US Trade Deficit Hits Record Despite Tariffs

US trade deficit widened to a new high even after sweeping tariffs, highlighting limits of protectionist policies so far.

The US goods trade deficit climbed about 2.1% year over year to roughly $1.2 trillion, according to data from the Bureau of Economic Analysis. The increase came despite aggressive tariff measures introduced by Donald Trump aimed at boosting domestic manufacturing and reducing reliance on imports.

Key Drivers

Imports hit a record $3.4 trillion, fueled partly by demand for AI-related computer equipment.
Exports also reached a high, though shipments of food and cars declined.
Companies rushed to import goods early last year before tariffs took effect, distorting trade patterns.

China Trade Fell, Others Rose

The US trade deficit with China dropped about 30% to $202.1 billion, its lowest level in roughly two decades. But gaps widened with other countries, including Mexico, Vietnam, and Taiwan, offsetting the decline.

Volatile Monthly Swings

The deficit jumped nearly 33% in December to $70.3 billion, driven by rising imports of telecommunications equipment, pharmaceuticals, and gold. Analysts say shifting tariff announcements created erratic trade flows throughout 2025.

Outlook

Economists at Wells Fargo expect imports could still rise despite tariffs as supply chains adjust. A separate analysis from JP Morgan Chase Institute found many firms had already begun shifting sourcing away from China before tariffs took effect, suggesting policy impacts may take time.

Tariffs reshaped who the US trades with, but not how much. The deficit remains near record levels, raising questions about whether trade barriers can meaningfully shrink it.

Japan Bond Market Explained: Why Yen Carry Trade Still Moves Stocks And Crypto?