The U.S. trade deficit in goods reached a new record in 2025, government data showed Thursday, even as President Donald Trump’s sweeping tariff policy marked its second year. The overall goods gap widened slightly to $1.24 trillion for the year, the highest figure in Commerce Department records dating back to 1960.
When services are included, the total U.S. trade deficit for 2025 narrowed marginally to $901.5 billion from $903.5 billion in 2024, remaining the third-largest on record. However, the December deficit surged 32.6% to $70.3 billion, exceeding forecasts as exports fell and imports rose.
The annual figures reflect a trade landscape heavily reshaped by Trump’s tariff agenda, which pushed the average effective U.S. tariff rate to its highest level since the 1930s. A key shift was a significant narrowing of the goods deficit with China, which fell to its lowest since the early 2000s. U.S. imports from China dropped by 30% in 2025 following tariff escalations in April that later cooled.
Analysts identified several factors behind the volatile flows. Chad Bown of the Peterson Institute for International Economics noted that a surge in imports of advanced semiconductors for AI data centres, primarily from Taiwan, contributed to the figures. He also cited “front-running” behaviour by companies seeking to beat upcoming tariffs, which may explain stronger imports earlier in the year. Furthermore, some tariff exemptions, such as for electronics, influenced patterns.
The reconfiguration of supply chains led to record-high trade deficits with partners like Taiwan and Mexico, as businesses diversified away from China. Oren Klachkin of Nationwide described 2025 as a “roller-coaster ride” for trade due to tariff shocks, but noted the annual deficit barely changed, decreasing just 0.2%. “With the peak tariff drag now likely behind us, we expect trade to settle into a more predictable rhythm,” he said.
Despite the administration’s claim that tariffs have “rescued our economy and national security,” a New York Federal Reserve study found nearly 90% of the tariff costs are borne by U.S. firms and consumers. This dynamic presents a challenge as households face persistent affordability pressures. The data underscores the difficulty of reducing the structural trade gap through protectionist measures alone, even as global sourcing strategies continue to realign.
