US Trade Deficit Jumps to Record High Amidst Tariff Concerns
The US trade deficit widened significantly in December, reaching a staggering $98.4 billion, the highest level since March 2022. This 24.7% increase from November's revised deficit of $78.9 billion was driven by a surge in imports, hitting an all-time high.
Economists had anticipated the deficit to increase to $96.6 billion, aligning with the previously reported $78.2 billion trade gap in November. President Trump's suspension of a 25% tariff on Mexican and Canadian goods until next month was a notable development. On the other hand, an additional 10% levy on Chinese imports went into effect on Tuesday.
The White House has justified the tariffs as a measure to hold these nations accountable for addressing illegal immigration and preventing the influx of illicit substances like fentanyl.
Imports surged 3.5% to an unprecedented $364.9 billion, while exports declined 2.6% to $266.5 billion. Despite the widening trade deficit, its impact on GDP was surprisingly neutral in the fourth quarter, according to the government's preliminary estimate. The economy expanded at an annualized rate of 2.3%, with inventories contributing to the slowdown, following a 3.1% growth in the previous quarter.