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April 3, 2025

The US trade deficit remained elevated in February at $122.7 billion as importers stocked up ahead of recently announced tariffs. That is down 6.1% from the January increase, which showed the largest increase in the deficit on record. Imports were steady in February while exports increased. The deficit has increased 86% year-over-year with imports increasing 21.4% and exports adding just 4.6%.

Importers stocked up in January and February in anticipation of potential tariff announcements. Since February, an additional 10% of tariffs were applied to China on March 2; 25% hit non-USMCA-eligible Canadian and Mexican imports on March 3; steel and aluminum tariffs went into effect on March 12; auto tariffs will take effect on April 3; 10% across-the-board tariffs will go into effect on April 5; 60 countries will see additional increases on April 9; and, tariffs on auto parts will go into effect on May 3.

Imports were essentially flat from January's elevated level, falling only $0.5 billion. Increases in most categories were offset by finished metal shapes (including gold) and nonmonetary gold, which are not included in the GDP calculation.

Outside of those categories, imports rose $3.4 billion in February. Importers stocked up mainly on consumer goods, up $2.4 billion alone.

Cell phones and pharmaceuticals accounted for much of that increase though there were some gains in furniture, household appliances and apparel. Capital goods increased $981 million on more computers, medical equipment and aircraft engines. We saw stocking up on auto parts ahead of new tariffs, up $517 million, while engines and tires showed slight increases.

Imports of services rose slightly and were broad-based. That includes financial services and travel abroad.

Exports increased 2.9%, or $8.3 billion in February. After adjusting for gold exports, they were up by approximately $5 billion, indicating that the overall impact on the February deficit was negligible. A strong dollar and weak growth abroad have weighed on goods exporters.

Exports of capital goods increased by $2.7 billion on strong aircraft orders as well as computer accessories. Exports of cars and buses rose by $1.6 billion in February. Consumer goods posted slight gains, up $514 million; gem diamonds accounted for all that increase. Outside of nonmonetary gold, industrial supplies were negative: Fuel oil exports dropped $1 billion alone. Exports of services declined $0.4 billion on travel, transport and government goods and services. Financial services exports increased. Inbound travel from abroad, which is an export, was not as strong.

Deficits remained elevated with countries which had been threatened with tariffs early in the year. The largest increases in February occurred with the EU, Vietnam, Taiwan, Mexico and India. That was offset by slight declines in deficits with China and Canada, although total trade with both countries remained elevated. Switzerland saw a reversal of January's increase as trade in gold slowed.