- Trade deficit increases 24.7% to $98.4 billion in December
- Trade gap at $918.4 billion in 2024, largest since 2021
- Imports jump 3.5% in December to record high $364.9 billion
- Exports decrease 2.6% to $266.5 billion
- Goods deficit widens with Canada, shrinks with China, Mexico
WASHINGTON, Feb 5 (Reuters) - The U.S. trade deficit widened sharply in December as imports surged to a record high against the backdrop of tariff threats, which might have prompted businesses to rush purchases of foreign-made goods like metals and computers.
The report from the Commerce Department on Wednesday showed the United States experienced significant deficits with several trade partners, including China, Mexico and Canada, which have been targeted by President Donald Trump's administration for broad or additional tariffs. Trump on Monday suspended a 25% tariff on Mexican and Canadian goods until next month.
An additional 10% levy on goods from China went into effect on Tuesday. The White House said the tariffs were to "hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country."
"The strength of imports appears largely driven by businesses rushing orders ahead of potential tariffs, a trend unlikely to reverse any time soon given there is still the risk of 25% tariffs on Mexico and Canada next month," said Thomas Ryan, North America economist at Capital Economics. "Even though survey data point to an imminent rebound in exports, this suggests the trade deficit will remain wide this quarter."
The trade gap increased 24.7% to $98.4 billion, the highest since March 2022, from a revised $78.9 billion in November, the Commerce Department's Bureau of Economic Analysis said. The rise was the largest since March 2015.
Economists polled by Reuters had forecast the trade deficit soaring to $96.6 billion from the previously reported $78.2 billion in November. The trade deficit swelled 17.0% to $918.4 billion in 2024, the largest since 2021.
Imports increased 3.5% to an all-time high of $364.9 billion. Goods imports soared 4.0% to $293.1 billion. They were boosted by a $10.8 billion jump in industrial supplies and materials, mostly reflecting a $9.2 billion increase in finished metal shapes amid tariffs on steel and aluminium imports.
WEAK EXPORTS
Capital goods imports increased $1.3 billion, lifted by computers as well as computer accessories. But imports of civilian aircraft fell as did those of automotive vehicles, parts and engines. Consumer goods increased $2.2 billion, driven by toys, games and sporting goods, cell phones and other household goods.
Exports fell 2.6% to $266.5 billion. Goods exports fell 4.2%, the most since May 2020, to $170.2 billion. They were pulled down by a $1.8 billion decline in consumer goods.
Exports of industrial supplies and materials, which include petroleum, dropped $1.8 billion. Capital goods exports declined $1.4 billion while those of automotive vehicles, parts and engines fell $0.9 billion.
The goods trade deficit jumped 18.2% to a record $123.0 billion. Adjusted for inflation, the goods deficit widened 15.4% to $111.9 billion.
Services imports increased $1.0 billion to a record $71.8 billion, while exports rose $0.4 billion to an all-time high of $96.3 billion.
The government's advance gross domestic product estimate for the fourth quarter published last week showed trade had a surprisingly neutral impact on GDP after being a drag for three straight quarters. The economy grew at a 2.3% annualized rate, with most of the drag coming from inventories, after expanding at a 3.1% pace in the July-September quarter.
The goods trade deficit with Canada increased $2.9 billion to $7.9 billion in December. While the goods trade gap with China narrowed in December, it increased to $295.4 billion in 2024 from $279.1 billion in 2023. The shortfall with Mexico contracted to $15.2 billion from $15.4 billion in November.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
Source: Reuters