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Tariff tracker, May 7: How Trump’s tariffs led to US trade deficit hitting a record high

The US trade deficit in the first three months of 2025 stands at $394 billion — almost double of $205 billion in the first three months of 2024, and $200 in the first three months of 2023. Here's why.

US President Donald Trump speaks before Steve Witkoff is sworn as special envoy during a ceremony in the Oval Office of the White House, Tuesday, May 6, 2025, in Washington. (AP Photo)

The US trade deficit — the key variable that led Donald Trump to slap sweeping tariffs across the world — widened further in March and, in fact, hit a record high of $140.5 billion. The US trade deficit is the net result of exports and imports of goods and services for any particular month.

This is ironic, as Donald Trump’s open threat since he was running the presidential campaign had been that he would impose punitive tariffs in a bid to erase the US trade deficit. Trump won in November last year and took charge in January this year. The trade deficit in the first three months of 2025 stands at $394 billion — almost double of $205 billion in the first three months of 2024, and $200 in the first three months of 2023.

The reason for the sharp widening of trade deficit: While March exports were $278.5 billion, $0.5 billion more than February exports, yet March imports were $419.0 billion, $17.8 billion more than February imports, according to a press release published on May 6 by US Bureau of Economic Analysis and the US Census Bureau.

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“Year-to-date, the goods and services deficit increased $189.6 billion, or 92.6 percent, from the same period in 2024. Exports increased $41.1 billion or 5.2 percent. Imports increased $230.7 billion or 23.3 percent,” stated the press release.

The data suggests that domestic US consumers and companies rushed to import in big quantities anticipating higher prices once the tariffs came into effect. This shows how counter-productive even the mere threat of tariffs can be for an economy.

Among the key items where US imports shot up the most are:

Pharmaceutical preparations imports increased $20.9 billion
Computer accessories increased $2.0 billion
Passenger cars increased $2.1 billion

Equally instructive were the categories where imports fell. For instance, imports of industrial supplies and materials decreased $10.7 billion. This is odd given the broader claims by the Trump Administration that tariff announcements have led to trillions of dollars being invested into domestic American manufacturing.

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To be sure, with the imposition of US reciprocal tariffs on April 2 and the various retaliatory tariffs by other countries especially China, it is most likely that both imports and exports will come down sharply in the months starting April. Since the US has imposed tariffs against all countries, even those against whom it enjoys a trade surplus, imports are likely to fall sharper than exports, and, as a result, the trade deficit is likely to come down when the April data is released.

However, thanks to the counter-productive tariffs policy, neither the current surge in trade deficit nor the likely fall in it in April are healthy signs. They both are aberrations induced by the tariff policy.