US Trade Deficit Narrows by Most on Record as Imports Plunge

(Bloomberg) — The US trade deficit narrowed in April by the most on record on the largest-ever plunge in imports, illustrating an abrupt end to the massive front-loading of goods by some companies ahead of higher tariffs.

The gap in goods and services trade shrank 55.5% from the prior month, to $61.6 billion, the smallest since 2023 and more than completely reversing the sharp widening that occurred in the first quarter, Commerce Department data showed Thursday. The median estimate in a Bloomberg survey of economists was for a $66 billion deficit.

Imports of goods and services declined a record 16.3% in April, while exports increased 3%.

The sharp narrowing in April puts trade on track for a large contribution to gross domestic product in the second quarter after being largely responsible for a 0.2% annualized decline in first-quarter GDP. Higher US reciprocal duties on most imported goods that went into effect early in the month helps explain the huge slowdown in inbound shipments from overseas producers.

It’s unclear how much net exports will boost the calculation for the April-June period. That’s because President Donald Trump has dialed back or delayed some of the import taxes, or raised them on certain products like steel and aluminum. The administration has also said it’s been negotiating with a number of countries on new trade deals, including China.

“The narrowing trade deficit in 2Q will boost GDP, but depletion of inventories of previously imported goods will likely temper the tailwinds from the trade component,” Stuart Paul, economist at Bloomberg Economics, said in a note.

Trump and Chinese President Xi Jinping spoke Thursday, according to Chinese state media, amid trade tensions that have roiled relations between the world’s two largest economies.

A separate report showed applications for unemployment benefits unexpectedly rose last week to the highest since October, adding to signs that the job market is cooling. Initial claims increased by 8,000 to 247,000 in the week ended May 31, a period that included the Memorial Day holiday.

The April trade report showed imports of consumer goods slumped $33 billion, largely due to a sharp decline in inbound shipments of pharmaceutical preparations. Imports of industrial supplies, motor vehicles and capital equipment also declined.

The drop in imports of pharmaceuticals resulted in a sharp narrowing in the US goods-trade deficit with Ireland, a major source of those components, shrank to a seasonally adjusted $9.5 billion from $29.3 billion a month earlier. 

Meanwhile, the goods-trade deficit with China narrowed to $19.7 billion. The value of imports from China was the lowest since the early months of the pandemic.

China is a key target of the Trump administration’s tariffs as the president seeks fairness in bilateral commerce and aims for more foreign investment in the US, stronger domestic production and improved national industrial security. Trump also see import duties as a means to raise revenue for the government.

The shortfalls with both Canada and Mexico also narrowed. The balance with Switzerland shifted from a deficit of $15.4 billion in March to a surplus of $3.5 billion in April. The reversal likely reflected a huge decline in shipments of gold from Switzerland.

On an inflation-adjusted basis, the total US merchandise trade deficit narrowed to $85.6 billion in April, the smallest since the end of 2023.

Survey data from the Institute for Supply Management indicate the trade deficit continued to shrink in May. An index of manufacturer import showed the steepest contraction since 2009.

(Adds graphic)

©2025 Bloomberg L.P.