The U.S. trade deficit in goods and services soared to a record $140.5 billion in March. Year-to-date, the deficit has increased 92.6%, as companies and consumers rush to import goods before President Donald Trump's sweeping global tariffs increase take hold on July 6.
Imports alone have risen 23.3% so far this year and were $17.8 billion higher just last month, the Bureau of Economic Analysis said Tuesday. Exports from the U.S. to other countries increased by a much smaller $500 million.
Trump's tariffs, which already amount to more 145% on China, are set to increase in just under 65 days after they were initially paused.
Imports of consumer goods in March rose to an all-time high, led mainly by a big increase in pharmaceutical imports. The apparel, furniture, jewlery, household appliance and textile categories also saw increases from February.
U.S. gross domestic product shrank 0.3% in the first quarter because of the biggest drag from net exports — the difference between total exports and total imports — in more than a half-century, according to Wells Fargo economists. Other parts of the economy also showed signs of slowing. Consumer spending rose 1.8% in the first quarter, the weakest pace since mid-2023.
Economists widely expect the surge in imports to slow in the second quarter, which should allow GDP to rebound into positive territory. But some analysts, including those at Goldman Sachs, still see the chances of a recession within 12 months at 45%.
"We still expect further tariff increases in other areas — e.g. pharmaceuticals, semiconductors, and potentially movies — and see a meaningful risk that some of the paused 'reciprocal' tariffs will take effect after all," Goldman Sachs chief economist Jan Hatzius wrote to clients Tuesday morning.
Meanwhile, Statistics Canada reported Tuesday that exports from Canada to the U.S. fell 6.6%, the second straight month of declines. At the same time, exports from Canada to other countries rose. The U.K., Germany, the Netherlands and Hong Kong were the primary recipients of those. Crude oil was the top Canadian export to the latter two of those four markets.
