A jump in imports and weaker exports pushed the US goods trade deficit to its highest level in 14 months, raising concerns that net exports will weigh on economic growth despite the country’s resilient outlook.
The US goods trade deficit widened to its highest level in 14 months in May after companies increased imports in anticipation of supply disruptions and higher prices stemming from the conflict in the Middle East. The larger-than-expected deficit also prompted economists to lower their second-quarter growth forecasts.
The goods trade gap increased 27.4% to USD 105.8 billion in May, the highest level since March 2025, according to the US Commerce Department’s Census Bureau, exceeding economists’ forecasts of USD 85 billion.
This was also caused by a drop in exports, which fell USD 11.8 billion, or 5.4%, to USD 207.7 billion in May, weighed down by a 9.2% plunge in exports of consumer goods. Industrial supplies exports tumbled 7.0%, while those of capital goods dropped 5.0%. Exports of other goods also decreased 6.8%. Meanwhile food, feed and beverage exports increased 3.9%, and automotive vehicle exports rose 0.5%.
Imports of goods increased USD 10.9 billion, or 3.6%, to USD 313.4 billion, also a 14-month high, driven by a 6.3% surge in imports of automotive vehicles.
“The widening trade deficit is bad news for national income growth, and it suggests that net exports might drag down real GDP growth too,” Carl Weinberg, Chief Economist at High Frequency Economics was quoted as saying to Reuters.
“The AI boom had better generate a corresponding increase in services exports to offset the influx of equipment. If it doesn’t, then this AI bubble is a losing proposition for the economy.”
Meanwhile, S&P Global said it affirmed its “AA+” credit rating for the US, citing the economy’s resilience that supports solid fiscal revenue collection.
The US economy is expected to grow around 2% over 2026 to 2029, the ratings agency said, adding that despite heightened political polarisation, strong institutions and the system of checks and balances will continue to anchor policy outcomes.
In the first quarter, the US economy grew faster than previously estimated, with the gross domestic product increasing at an upwardly revised 2.1% annualized rate, higher than economists’ predictions of 1.6%.
