The US trade deficit reached a record high in January, increasing 34% to $131.4 billion due to front-loading of imports ahead of tariffs. This surge in imports, mainly driven by industrial supplies and consumer goods, has raised concerns about the potential for economic growth to slow down in the first quarter.
Imports rose 10%, the largest increase since July 2020, reaching $401.2 billion. The main drivers of this increase were industrial supplies, which saw a record 12.3% rise, and consumer goods, such as pharmaceutical preparations, cell phones, and other household items. Despite some increases in capital goods exports, total exports rose only 1.2% to $269.8 billion.
The trade deficit’s widening has led economists to warn of the potential for GDP contraction in the first quarter. However, some argue that moderate growth is still possible due to factors such as increased gold imports, mostly from Europe, driven by fears of tariffs on the precious metal.
A recent forecast by the Atlanta Federal Reserve predicts a 2.8% annualized decline in GDP this quarter. This comes after the economy grew at a 2.3% rate in the October-December quarter.
Source: https://www.reuters.com/markets/us/us-trade-deficit-hits-record-high-january-imports-surge-2025-03-06