The numbers: U.S. businesses brought in a new high of foreign goods in March for the fourth month in a row as they tried to beat price increases tied to the Trump tariffs — assuring a weak GDP report in the first quarter.
The U.S. trade deficit in goods surged 10% in March to a record high of $162 billion, the government said Tuesday.
The deficit began to surge in December after Donald Trump won the presidential election and many businesses took seriously his vow to raise tariffs. They’ve been importing extra amounts of cellphones, computers, drugs, clothes and many other goods to try to ride out the trade wars.
Trade deficits subtract from gross domestic product, the official scorecard of the U.S. economy. The record trade gap in the first quarter is expected to produce a GDP reading of just 0.4% annual growth, which would be the smallest increase in nearly three years.
Forecasters might further reduce GDP estimates after the latest surge in the trade deficit.
Key details: U.S. goods imports rose 5% in March to $342.7 billion. They are also up a whopping 31% compared with the same month in 2024.
Exports of U.S.-made goods rose a smaller 1.2% to $180.8 billion in March. Exports could begin to fall if other countries retaliate with tariffs of their own, as some have.
Also in the report, the government said retail inventories fell 0.1% and wholesale inventories increased 0.5%.
Higher inventories add to GDP, potentially offsetting some of the drag from the record trade deficit.
Big picture: Trump has vowed to slash a chronic U.S. trade deficit, but for now, tariffs have pushed it to new highs as businesses continued to “front run” the tariffs.
The appetite for foreign goods began to shrink as the duties started in late March and early April. Major U.S. ports saw fewer ships planning to arrive in May because high tariffs make many foreign goods too expensive to sell.
The trade deficit could fall sharply in the coming months if high tariffs remain in place, but economists say prolonged trade wars could severely damage the U.S. economy and even cause a recession.