US Goods-Trade Deficit Narrows Thanks To Broad Drop In Imports

The US merchandise-trade deficit shrank in June by more than forecast, reflecting a broad decline in imports as the pre-tariff rush to secure goods unwinds.

The shortfall in goods trade narrowed 10.8% from the prior month to $86 billion, Commerce Department data showed Tuesday. The figure, which isn’t adjusted for inflation, was lower than all forecasts in a Bloomberg survey of economists.

Imports fell 4.2% to $264.2 billion, including a decrease in shipments of consumer goods to the lowest since September 2020. The value of industrial supplies imports dropped to the smallest since 2021, while shipments of motor vehicles also fell. US exports of merchandise decreased 0.6%.

The figures will help economists fine-tune their estimates of how much net exports boosted second-quarter gross domestic product, which will be reported on Wednesday. Distortions in trade that pushed down GDP at the start of the year are poised to largely reverse in the most recent quarter. 

A massive increase in imports by US companies trying to get ahead of President Donald Trump’s tariffs caused net exports to subtract 4.61 percentage points from the GDP calculation in the January-March period.

The economy shrank at an annualized 0.5% annualized pace in the first quarter. Before the latest trade figures, the Atlanta Fed’s GDPNow forecast penciled in 2.4% growth for the April-June period, with net exports adding 3.31 percentage points.

In addition to the merchandise-trade data, the latest advance economic indicators report showed retail inventories rose 0.3% last month, the most since September and reflecting a surge at car dealers. Stockpiles at wholesalers climbed 0.2%.

US manufacturers remain challenged by uncertainty from Trump’s ever-changing tariff announcements. While some US trading partners have reached trade deals, others face a Friday deadline to come to an agreement with the Trump administration or risk massive increases in duties.

Trump has made tariffs a cornerstone of his strategy to spur domestic production, drive export growth to erase deficits with US trading partners, raise revenue for the government and bolster national security.

More complete June trade figures that include the balance on the services account are due Aug. 5.