US trade deficit widens nearly 25% in December ahead of Donald Trump term
The US trade deficit widened sharply at the end of 2024 on a surge in imports prior to the start of Donald Trump’s second term as president and his follow-through on the promise of sweeping tariffs.The December shortfall in goods and services trade grew nearly 25% from the prior month to $98.4 billion, Commerce Department data showed Wednesday. That culminated in a full-year deficit of $918.4 billion after the gap narrowed in 2023 by the most in 14 years.The value of imports, unadjusted for inflation, increased 3.5% in December, while exports fell 2.6%.
The end-of-year flurry of imports was broad and included a surge in inbound shipments of industrial products that likely reflected efforts by US companies to secure products in advance of Trump’s tariffs. Moreover, many importers were hoping to mitigate disruptions from a potential strike by dockworkers that was averted last month.
Monthly trade figures are set to take on added economic and geopolitical significance as the Trump administration looks to tariffs to spur domestic production, enhance national security and adjust to what it sees as unfair trade policies. As seen just weeks after Trump’s inauguration, those efforts extend to America’s largest trading partners.
Trump had ordered 25% tariffs on all goods from Canada and Mexico to take effect on Tuesday but paused them for 30 days after leaders of the two countries committed to greater efforts to stem the tide of illegal migration and illicit drug traffic. Across-the-board tariffs of 10% on imports from China did go into effect.
The latest trade data showed the US goods shortfall with Mexico narrowed slightly from a month earlier to a seasonally adjusted $15.2 billion in December, while the deficit with Canada widened to the largest since July 2022. Trade figures from Canada showed a jump in crude oil exports.
For all of 2024, the merchandise-trade deficit with Mexico widened on an unadjusted basis to a record $171.8 billion. The gap with Canada narrowed last year. The US merchandise-trade deficit with China widened last year to $295.4 billion.
Tariffs will be a tough sledding for companies that for decades have looked to take advantage of lower costs, and often looser regulations, in other countries. Furthermore, supply chains are not easily reconfigured.
Economists also say the trade deficit is driven largely by macroeconomics including high US consumption rates and a strong dollar that makes imports cheap and American exports more expensive. Tariffs themselves are leading to a bigger appetite for the dollar.
In December, the overall jump in goods imports was broad and included the largest percentage increase in industrial supplies since 1993. The surge was largely due to a jump in inbound shipments of finished metal shapes, which can be used in the manufacturing of cars, appliances and other equipment. The US also imported more crude oil and gold.
Goods and services trade contributed virtually nothing to gross domestic product in the fourth quarter after subtracting from growth the rest of the year.
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