US trade deficit hits record $1.24 trillion in 2025 despite Trump tariffs

US trade deficit hits record high despite Trump tariffs

The United States trade deficit widened sharply in December, pushing the annual goods shortfall for 2025 to a record $1.24 trillion. The data, released Thursday by the Commerce Department, shows imports surged despite former President Donald Trump's tariffs on foreign goods.

The deficit in goods trade with China plunged nearly 32 percent to $202 billion last year. However, trade was diverted to other nations as geopolitical tensions with Beijing continued.

Trade shifts from China to Taiwan and Vietnam

The US goods trade gap with Taiwan doubled to $147 billion in 2025. The deficit with Vietnam shot up 44 percent to $178 billion.

American companies boosted imports of computer chips and other technology goods from Taiwan to support massive investments in artificial intelligence. This shift contributed significantly to the overall record deficit.

• Goods deficit with China: Fell 32% to $202 billion.
• Goods deficit with Taiwan: Doubled to $147 billion.
• Goods deficit with Vietnam: Rose 44% to $178 billion.

December deficit balloons to five-month high

The monthly trade gap ballooned by 32.6 percent to $70.3 billion in December, a five-month high. Economists polled by Reuters had forecast the deficit would contract to $55.5 billion.

Imports increased 3.6 percent to $357.6 billion for the month. Goods imports surged 3.8 percent to $280.2 billion, boosted by industrial supplies and capital goods like computer accessories and telecom equipment.

Exports fell 1.7 percent to $287.3 billion in December. The second straight monthly deterioration in the trade deficit suggests trade made little to no contribution to gross domestic product growth in the fourth quarter.

Tariffs fail to spark manufacturing renaissance

Trump's barrage of tariffs, aimed at addressing trade imbalances, has not yielded a US manufacturing boom. Factory employment declined by 83,000 jobs from January 2025 through January 2026.

"There just isn’t any evidence... to suggest that tariffs have materially impacted trade deficits historically," said Chad Bown, a senior fellow at the Peterson Institute for International Economics.

The report was delayed due to last year's government shutdown. For the full year, exports rose 6 percent while imports rose nearly 5 percent.

AI demand drives import surge

The rise in capital goods imports, including a $5.6 billion increase in December, is likely related to the construction of data centers to support artificial intelligence. "Surging computer imports... could remain strong due to AI-related demand," said Citigroup economist Veronica Clark.

Imports were boosted by a $7 billion increase in industrial supplies, mostly non-monetary gold, copper, and crude oil. However, consumer goods imports fell, pulled down by pharmaceutical preparations.

Large swings in pharmaceutical imports have occurred because of tariffs. Exports of capital goods increased in December, boosted by semiconductors, and there were also increases in exports of consumer goods.