Higher net exports are expected to add to solid fourth-quarter GDP growth.
President Donald Trump’s tariffs helped shrink the U.S. trade deficit to its lowest monthly level in more than five years, according to new data released by the Bureau of Economic Analysis on Dec. 11.
The U.S. goods and services trade deficit narrowed 10.9 percent in September to $52.8 billion—the lowest monthly deficit since June 2020—down from $59.3 billion registered in August.
Economists polled by Reuters had forecast a September trade deficit of $63.3 billion.
Year-to-date, the trade deficit increased by $112.6 billion, or 17.2 percent, as imports and exports rose 7.7 percent and 5.2 percent, respectively.
Exports increased in September by 3 percent to $289.3 billion—the second highest on record—driven by shipments of nonmonetary gold and pharmaceutical preparations.
Imports ticked up 0.6 percent to $342.1 billion.
Government data revealed a sizable jump in pharmaceutical imports, surging by $3.1 billion. Inflows of capital equipment, autos, and a broad range of consumer goods, including cell phones, appliances, toys, and furniture, continued to weaken.
The real (inflation-adjusted) merchandise trade deficit also fell by 5.6 percent, or $4.7 billion, to $79 billion in September.
This year’s trade activity has been marked by enormous volatility, fueled by the current administration’s tariff agenda, which has also impacted gross domestic product.
Trade plays a role in economic growth prospects because exports add to GDP growth and imports subtract from it.
Record-high imports in the first quarter, for example, trimmed 4.68 percentage points from gross domestic product, leading to a 0.3 percent contraction.
Looking at third-quarter data, the Atlanta Federal Reserve estimates that net exports will add 0.86 percent to the final GDP reading, which is expected to come in at 3.5 percent.
The U.S. economy is expected to grow about 1.7 percent in the fourth quarter, according to the New York Fed Staff Nowcast.
Trump’s tariffs helped narrow the trade gap with other major U.S. trading partners, including China and India.
The goods deficit with China tumbled by $4 billion to $11.4 billion in September. Exports climbed 0.2 percent to $8.8 billion, while imports fell $3.9 billion to $20.1 billion.
America’s merchandise deficit with India also narrowed by about $1.8 billion to $3.05 billion.
U.S. and Indian delegations have been engaged in negotiations to iron out a bilateral trade agreement.
Appearing before a Senate Appropriations Committee hearing this week, U.S. Trade Representative Jamieson Greer said New Delhi has been a “very difficult nut to crack.”
“But they’ve been very forward-leaning,” Greer said. “The type of offers they’ve been talking to us about have been the best we’ve ever received as a country.”
Conversely, the goods deficit with Ireland increased by $15.3 billion to $18.2 billion. The trade deficits with Mexico and the European Union widened to $17.842 billion and 17.83 billion, respectively.
By Andrew Moran
