U.S. trade deficit takes a hit as tariffs reduce imports

Key Points

• The U.S. trade deficit shrank to a seasonally adjusted $61.6 billion in April—the lowest since September 2023—down from a record $138.3 billion in March, marking the biggest monthly drop since 1992.
• Imports fell 16% to $351 billion, led by a 32% plunge in consumer goods to $69.9 billion, driven by a $26 billion decline in pharmaceuticals as companies rushed shipments ahead of new tariffs.
• President Trump’s tariff policies, including a 10% general levy and hikes up to 145% on Chinese goods, prompted a 90-day hold for most but caused import declines exceeding $29 billion from the EU and over $6 billion each from Canada and Mexico.
• Exports climbed 3% to a record $289.4 billion, though analysts warn the deficit squeeze may be temporary as firms clear out inventories and lingering tariff uncertainty clouds the outlook.

The U.S. experienced a sharp decline in imports as a result of President Trump’s new tariff policies caused the U.S. trade deficit to drastically shrink in April. In April, the trade gap shrank to a seasonally adjusted $61.6 billion, the lowest since September 2023, according to the Commerce Department. This represented a dramatic decline from the record $138.3 billion deficit in March, when companies rushed to import goods ahead of Trump’s “Liberation Day” tariffs on April 2. This $76.7 billion decrease is the biggest monthly decline in the goods and services deficit since 1992. The 55% drop is the second-largest percentage drop since a 59% drop in February 1992.

U.S. trade deficit takes a hit as tariffs reduce imports

The biggest decline in history occurred when imports dropped 16% to $351 billion. Imports of consumer goods saw the biggest drop, dropping 32% to $69.9 billion, mostly as a result of a $26 billion decline in pharmaceuticals. Fearing impending tariffs, pharmaceutical companies hurried shipments into the United States. Additionally, there was a significant drop in the import of automobile parts, industrial supplies, and materials.

A flurry of changes in tariff policy preceded the import collapse in April. Trump declared a 10% general tariff and higher rates for specific nations early in the month. A week later, he put a 90-day hold on most increases, with the exception of China, where tariffs rose as high as 145%. (A later agreement in May lowered that rate.)

Important trading partners saw a sharp decline in imports. On a non-seasonally adjusted basis, imports from the European Union fell by more than $29 billion between March and April. China’s imports dropped $4 billion, while Canada and Mexico each saw declines of over $6 billion. “Swings like that only happen under conditions of extreme policy disruption,” said chief economist of RSM Joe Brusuelas.

Exports increase and deficit may improve

Exports, meanwhile, increased 3% to a record $289.4 billion, presumably as overseas consumers hurried to buy American products before retaliatory tariffs were imposed.

Even though the trade deficit has decreased, analysts warn that the effects might only last a short while. Many companies are still clearing out inventory that they accumulated at the beginning of the year. The outlook is clouded by the ongoing uncertainty surrounding tariff levels.

Due in large part to soaring imports in anticipation of April, the first-quarter GDP shrank at an annual rate of 0.2%. When calculating GDP, imports are a negative factor that deducts 4.9 percentage points from growth. A portion of the loss was offset by inventory stockpiling, and analysts anticipate that updated data may reveal higher first-quarter output. A clearer picture might be obtained by averaging Q1 and Q2.

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