The US trade deficit in goods and services narrowed in January as exports jumped to a record high and imports fell slightly, driven by continued volatility stemming from tariffs.
The trade gap narrowed by 25.3% to $54.5 billion in the first month of the year, according to U.S. Bureau of Economic Analysis data released Thursday. Exports jumped up 5.5% to an all-time high of $302.1 billion, with exports of goods increasing $14.6 billion to $195.5 billion for the month. Imports fell 0.7%, $2.6 billion less than in December at $356.6 billion.
The numbers show a slight recovery from the previous month as American manufacturers adjusted to Trump’s tariffs, imposed last April, but some manufacturers are not faring as well as they were before Trump entered office. The Supreme Court struck down Trump’s sweeping emergency tariffs in February, deeming them illegal.
While exports hit the highest on record with capital and other goods, such as electronics and machinery, leading the charge, exports of consumer goods and automotive vehicles, parts, and engines hit the lowest on record since October 2022 and September 2021, respectively. These records occurred when consumer and grocery prices went up by 7.7%, automotive prices reached record highs, and average new vehicle prices topped $45,000 for the first time.
“For major crops, we actually sold a little bit less than we had the previous year to date,” said Patrick Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri.
“The last couple of weeks since the war with Iran began, we are also seeing much higher costs of inputs, for things like fertilizer and fuel.”
Exports also continued to be buttressed by gold, which increased by $4.7 billion, hedging total exports by $14.6 billion in January, a sign of consumer and investor anxiety against economic uncertainty.
“I wouldn’t be surprised if we don’t get a refund for years. I never planned to get this money back.”
David Cascione, owner of Barrika Imports
Tariffs, shot down by the Supreme Court in February for overreach of executive authority and immediately reinstated by Trump with a global 10% tariff, are not yet reflected in the monthly report, which failed to result in a decline in imports as promised, likely due to sector resilience.
David Cascione, owner of Barrika Imports, an independent distributor of cider and wines from Spain’s Basque Country, adjusted nimbly to tariffs despite a lack of stockpiled inventory and warehouse space, as he was able to strike deals with producers.
“My volume didn’t really change. It was a combination of me taking a haircut on margins along with some of my producers offering a temporary discount to see if this would blow over,” he said.
“I took the approach of, there’s nothing I can do. I can’t afford not to have wine to sell.”
Cascione, one of 330,000 importers who paid tariffs, totaling $50,000 since April, is hopeful that U.S. Customs and Border Protection’s online claims portal, under development, will return the $166 billion in tariff collections, with interest. The customs agency said in a court filing last Thursday that the four-part system is nearly 40% to 80% complete.
“I wouldn’t be surprised if we don’t get a refund for years. I never planned to get this money back,” he said.
Trump has long believed that a large trade deficit means America is a loser in the world economy, a belief rebuked by economists as a growing deficit signals robust domestic demand, high consumer spending, and increasing foreign investment.
Trump’s “industrial boom,” however, has not materialized. The manufacturing sector lost an estimated 103,000 jobs between January 2025 and January 2026, according to the Federal Reserve Economic Data.
Looking ahead, economists are weighing the reinstatement of tariffs and the war with Iran, which has closed off the Strait of Hormuz, choking fuel and freight prices.
As the U.S. is the leading producer of crude oil, it may spark international gains as the Strait of Hormuz remains blockaded.
“It could reduce the amount of imports but increase the dollar value, but it could also potentially boost US exports,” said Ryan Young, senior economist at Competitive Enterprise Institute.
