Data released by the U.S. Department of Commerce on Tuesday showed that the goods and services trade deficit widened by 42.2% month-over-month in May to $77.6 billion, marking the largest deficit since March 2025, due to a combination of declining exports and rising imports.
Data released by the U.S. Department of Commerce on Tuesday showed that the goods and services trade deficit widened by 42.2% month-over-month in May to $77.6 billion, marking the largest deficit since March 2025, due to a combination of declining exports and rising imports. The median market forecast from surveyed economists was $78.4 billion, slightly above the actual figure.
Exports weighed down by gold; imports broadly strengthened
On the export side, exports declined by 3.2% month-over-month in May, dragged down by falling prices of non-monetary gold—a highly volatile commodity. Imports, meanwhile, rose broadly, increasing by 3.3% for the month.
In prior months, the outbreak of the Iran war spurred a surge in petroleum and refined product exports, which had temporarily offset the persistent upward pressure on capital goods imports driven by U.S. data center construction. However, the latest data indicate this offsetting effect is fading. Weekly data from the U.S. Energy Information Administration through June 26 show that petroleum and refined product exports have largely returned to pre-war levels. Meanwhile, imports of computer components and semiconductors rose again in May, while imports of computers and telecommunications equipment declined.
Advance corporate stockpiling may have boosted imports, significantly weighing on Q2 GDP composition
Recent purchasing managers’ surveys indicate that U.S. firms have increased inventory accumulation to mitigate risks of war-related supply chain disruptions and price hikes, which may have contributed to the rise in May’s import figures.
The May trade data will help economists further refine their estimates for second-quarter gross domestic product (GDP). Prior to the release, the Atlanta Fed’s GDPNow model indicated that net exports would subtract approximately 1.62 percentage points from Q2 GDP growth—far exceeding the 0.37-percentage-point drag seen in Q1.
Uncertain tariff outlook; North American trade agreement undergoes changes
Although several tariffs previously imposed by U.S. President Donald Trump were ruled invalid by the Supreme Court earlier this year, the current administration is exploring alternative legal avenues to reimpose import tariffs. The U.S. has also recently decided not to renew its trade agreement with Canada and Mexico, replacing it with an annual review mechanism, which could introduce new uncertainties for multinational corporations in the coming months.
From the perspective of bilateral trade patterns, the U.S. merchandise trade deficits with Mexico, Canada, and China all widened in May. Vietnam—the primary beneficiary of supply chain shifts stemming from the U.S.-China trade war during Trump’s first term—also saw its trade surplus with the United States expand.
With the FIFA World Cup officially kicking off last month, U.S. travel exports—i.e., spending by foreign visitors in the United States—rose slightly in May.
Adjusted for inflation, the real merchandise trade deficit widened to USD 100 billion in May, marking the highest level since March 2025.
Editor/Rocky