US trade deficit in goods widens to new record in 2025 despite Trump tariffs

Washington – The US trade deficit in goods expanded to a new record in 2025, government data showed on Feb 19, despite sweeping tariffs that US President Donald Trump imposed during his first year back in the White House.

The US goods deficit stood at US$1.24 trillion (S$1.57 trillion) for all of 2025, widening slightly from the level in 2024 to its biggest in Commerce Department figures dating back to 1960.

But the trade gap in goods with China narrowed for the year, as US imports from the world’s second-biggest economy dropped by 30 per cent.

When both goods and services were considered, the overall US trade deficit for 2025 narrowed to US$901.5 billion, from US$903.5 billion in 2024.

This was still the third-widest deficit on record.

In the month of December, the overall deficit grew more than expected by 32.6 per cent to US$70.3 billion, as exports fell and imports climbed.

Trade flows involving the world’s biggest economy were heavily swayed in 2025 as Mr Trump slapped fresh tariffs on goods from virtually all trading partners after returning to the presidency, as part of a push to reduce the US trade gap.

His moves brought the average effective tariff rate to its highest since the 1930s.

AI, front-loading

Dr Chad Bown of the Peterson Institute for International Economics told reporters on Feb 19 the uptick in imports was likely due in part to the US’ artificial intelligence build-out. This covers high-tech goods like advanced semiconductors, primarily manufactured in Taiwan, that eventually go towards data centres.

Another factor could be that Mr Trump’s waves of country-specific tariffs in 2025 contained significant exemptions, such as for electronic products like smartphones.

The shift in trade flows with China came as Mr Trump engaged in tit-for-tat tariff escalations with Beijing in April. Tensions between both countries have since cooled.

But overall import figures likely reflect changes in companies’ sourcing strategies, turning to countries like Vietnam for example, as the US-China relationship remained turbulent.

Meanwhile, “imports were a lot stronger at the beginning of the year than they were towards the end of the year”, Dr Bown said.

Some of this was probably due to companies “front-running to try to beat the tariffs” before they took effect, he added.

‘Roller-coaster ride’

“Trade took a roller-coaster ride in 2025 as tariffs jolted flows, mostly on the import side,” said Nationwide financial market economist Oren Klachkin in a note.

“But after all the tariff headlines and swings in the data, the trade deficit barely budged in 2025, decreasing only US$2.1 billion, or 0.2 per cent, on an annual basis,” he added.

Still, he noted significant moves under the surface.

The trade deficit with China fell to its lowest since the early 2000s while gaps with Taiwan and Mexico reached a record high, he said.

“With the peak tariff drag now likely behind us, we expect trade to settle into a more predictable rhythm,” said Mr Klachkin.

Mr Trump has been quick to attribute US economic growth and other achievements to his sweeping tariffs, saying on social media in January they have “rescued our economy and national security”.

But a New York Federal Reserve paper noted in February that nearly 90 per cent of the tariffs’ economic burden fell on US firms and consumers.

This underscores the Trump administration’s challenges ahead to convince American households of his economic record, as they grapple with affordability.

In December, exports of industrial supplies – including non-monetary gold – dropped, while imports in the same category rose for the month.

US imports of capital goods like computer accessories and telecommunications equipment picked up in the month. AFP