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June 5, 2025

The US trade deficit was cut by 55.5% in April from $138.3 billion to $61.6 billion as importers ceased purchases. On April 2nd, a baseline tariff of 10% was signed, along with higher reciprocal tariffs on more than 50 countries. Those were in place until April 9th when a pause went into effect. In addition, tariffs on China stood at 145% for most of the month of April.

April revealed the largest one-month narrowing of the deficit on record; the deficit narrowed by $76.7 billion. The second largest happened in November 2008 at $15.7 billion. The trade deficit is now back to September 2023 levels. Imports fell by 16.3% while exports rose just 3.0%.

The largest country-by-country changes in the deficit did not necessarily reflect the level of tariffs. The deficit narrowed most with Europe in April, led by Ireland and Switzerland. Much of that may be attributed to 1) pharmaceuticals and 2) nonmonetary gold. Deficits with Canada and Mexico, which were not subject to reciprocal tariffs but were targets of some of sector-specific tariffs, narrowed as well. Deficits with China, Vietnam and Japan were flat and the level of imports barely budged, while the deficit with Taiwan grew in April.

Imports of goods fell $68.9 billion in April. Consumer goods imports declined by $33 billion, with $26 billion of that increase in pharmaceuticals. Pharmaceuticals were one of the industries that stocked up the most in bonded warehouses earlier this year. Imports of cell phones and other household goods declined by $3.5 billion.

Industrial supplies and materials decreased $23.3 billion. That fall may be overstated; finished metal shapes, which include some gold that is not counted in GDP, decreased by $16.9 billion. That was partially offset by a small increase in nonmonetary gold. Other tariffed products like aluminum and iron and steel mill products declined by $534 million and $359 million, respectively.

Automotives and parts fell by $8.3 billion as auto tariffs went into effect on April 3. Passenger cars lost $6.4 billion while trucks declined $1.1 billion. Auto parts showed a small decline; however, tariffs on auto parts went into effect on May 3 and may show more of a loss in May's data.

Capital goods declined by $2.8 billion; half of that included semiconductors ($791 million) and civilian aircraft and engines ($796 million). Semiconductor tariffs went into effect on April 5.

Even agricultural products, which are exempt from most of the tariffs, were not exempt from the shrinking of trade in April. Shipping costs rose due to rerouting. Foods, feeds and beverages imports fell by $846 million. The declines were broad-based. Imports of services were flat.

Exports rose a tepid 3%, or $6.2 billion in April. After adjusting for declining gold exports including nonmonetary gold and finished metal shapes, exports were most likely negative, down $6.1 billion at the most. For the purposes of GDP calculations, that means that net exports did not decline as much as the headline of this report may state, even as the dollar weakened.

Exports of capital goods were the only goods category to post gains after adjusting for gold. They added $985 million; nearly all of that can be accounted for by a $974 million increase in computers, along with small gains in telecommunications equipment and semiconductors. Exports of aircraft, computer accessories and electrical equipment posted declines. Exports of services increased $2.1 billion on travel-related exports.

Consumer goods exports fell by $1.5 billion on pharmaceuticals, while automotive exports declined by $3.3 billion for passenger cars and trucks. Production has slowed as uncertainty has risen. Industrial supplies outside of gold declined, mainly on crude oil and petroleum exports. Finally, exports of foods, feeds and beverages lost $536 million.

This report does not account for shifts in prices. After adjusting for changes in prices, the real goods trade deficit decreased by 42.9%, versus a 46.3% decrease in the nominal deficit. That means, again, that the impact on GDP may be softened.