Record US Goods-Trade Deficit Shows Hit to Economy in Q1
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The U.S. merchandise-trade deficit unexpectedly widened in March to a record as companies continued importing goods to get ahead of tariffs, indicating a large hit to the economy in the first quarter.
The shortfall in goods trade grew 9.6% from a month earlier to $162 billion, Commerce Department data showed April 29. Because imports count against gross domestic product, the data points to a weaker print when the government releases its initial GDP estimate on April 30 and prompted several economists to downgrade their forecasts.
Separate data released April 29 showed tariffs are also weighing heavily on Americans’ views about the future of the economy and their personal finances. A measure of consumer expectations for the next six months slumped to the lowest since 2011 in April, according to a report from The Conference Board.
In the trade data, the surge in imports illustrated what is likely the final push by U.S. companies to secure goods and materials in advance of the duties on steel and aluminum that President Donald Trump imposed in March and the more sweeping tariffs announced in early April.
🇺🇸Largest US merchandise deficit on record: +10% to $162bn in March⚠️
✅Imports +5.0% front-running : consumer goods (+28%) & autos (+7%)
✅Exports +1.2% led by autos, food, ind supplies
🚨Goods trade deficit +33% since December!
🚨Imports +18% since December! — Gregory Daco (@GregDaco)
The median projection in a Bloomberg survey of economists calls for a 0.3% increase in GDP, the slowest pace since early 2022. But many economists anticipate a contraction, and an underlying measure of the Federal Reserve Bank of Atlanta’s GDPNow forecast now shows a drop of 1.5%.
“The advance trade figures support our estimate of 1.1% contraction of GDP,” Carl Weinberg, chief economist at High Frequency Economics, said in a note. “They even suggest that the risks to our forecast are to the downside.”
Stephen Stanley, chief economist at Santander U.S. Capital Markets, is even more pessimistic. Based on the trade figures, he took a full percentage point off his forecast, now calling for a 2.4% contraction. However, assuming imports normalize in the second quarter, GDP growth “should bounce back sharply,” he said.
March job openings and total separations change little; hires unchanged — BLS-Labor Statistics (@BLS_gov)
The president has made tariffs a cornerstone of his strategy to spur domestic production, drive export growth to erase deficits with U.S. trading partners, raise revenue for the government and bolster national security.
In the March merchandise trade report, imports rose 5% to $342.7 billion, led by a record surge in consumer goods, while inbound shipments of motor vehicles and capital goods also increased. Exports increased 1.2%.
The data showed a drop in imports of industrial supplies that include metals, petroleum, lumber and other products typically used in the production of other goods. It also includes imports of gold for investment purposes.
While it’s not clear in the latest data whether gold influenced the import figures, a good portion of the widening in the trade deficit early this year was traced to imports of gold bars. Economists will look to broader trade data on May 6 for clues on the change in imports of gold, which are classified as finished metal shapes.
Gold for investment purposes is excluded from the U.S. government’s calculation of GDP. Even excluding the precious metal, the Atlanta Fed’s GDPNow forecast sees trade subtracting more than 4 percentage points from GDP. That’s consistent will the pre-tariffs scramble for imports of other goods and materials.
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The April 29 Commerce Department report also showed stockpiles at wholesalers increased 0.5% for a second month. Retail inventories fell 0.1% last month, reflecting a decline at car dealers.
A report from the Bureau of Labor Statistics showed U.S. job openings fell last month to the lowest since September, indicating weaker labor demand amid increased economic uncertainty. But the data showcased a labor market that is still holding up fairly well. The number of layoffs fell to the lowest since June, and hiring was steady.
