The US trade deficit in goods increased from the year prior, despite Trump tariffs that attempted to close the gap.
The goods deficit wrapped up 2025 at a total of $1,240.9 billion, up 2.1% from last year, with a $25.5 billion increase. Imports also surged, increasing by $143.2 billion in 2025, according to Thursday data from the US Census Bureau and the US Bureau of Economic Analysis. Along with an increase in services surplus of $27.6 billion, the goods and services deficit was $901.5 billion, down $2.1 billion from 2024.
Trump’s tariffs, introduced with an anticipated impact of reducing imports, didn’t pan out as he’d expected. They did, however, cause enormous uncertainty for businesses, with many fearing an oncoming recession and major changes in import suppliers.
Despite Trump’s claims that the tariffs will bring the trade deficit down to “zero” and usher in an era of “unparalleled greatness,” businesses have seen otherwise, scrambling to adjust their order patterns throughout the year, with many stockpiling goods to save on costs.
“We avoided some of the worst-case scenarios for the economy overall. We ended up importing a little bit less than we would have normally and exporting a little bit less, but the difference is the trade deficit is a little narrower,” said Thomas Simons, chief US economist at Jefferies.
A steeper narrowing in October, where the deficit dropped to $28.7 billion, could be interpreted at face value as the work of tariffs in alleviating the deficit. But economists say the drop was prompted by fears of an incoming pharmaceutical tariff as businesses rushed to stockpile drugs.
Imports declined after the first three months of the year. “We saw a big run up in imports to try to beat the tariffs early in the year,” said Douglas Porter, chief economist at BMO Financial Group.
Import demand, however, held up, with annual goods imports increasing 3.4% to $3.4 trillion, the highest on record. Consumers, economists explained, are still spending despite tariff worries.
“Those at the top end of the income distribution, they are still spending as if nothing has changed or nothing bad has happened,” said Simons.
Capital goods imports were a significant portion of spending, clocking in at $5.6 billion, buoyed by $3.4 billion of computer accessories, which is likely due to chips and materials for AI data centers.
While the trade deficit was roughly the same as last year, trading dynamics with countries have occurred, notably with Mexico, Vietnam, and Taiwan, likely due to their lower tariff rates. Imports from China dropped from $438.7 billion the year prior, a nearly 30% decrease to $308.4 billion.
The US’s biggest trading partners include China and Mexico. December recorded a $14.5 billion trade deficit with Mexico and $12.4 billion with China.
“The deficit with Mexico is now almost as large as the deficit with China — in December alone, it’s larger than China or Europe,” Porter said. Most economists do not believe a growing trade deficit is necessarily a bad sign because money spent on imports can return as capital investment, boosting economic growth.
“I would not judge the health of the economy by how the trade deficit is doing. A classic example is that the US ran a trade surplus during the Great Depression,” said Porter.
“In fact, oftentimes if the economy is a lot stronger than other economies, the extra spending will bring in imports from around the world.”
