US Trade Deficit Surges in December Amid Tariff Anticipation
The US trade deficit in goods widened significantly in December, driven by businesses front-loading imports in anticipation of President Trump's administration implementing broad tariffs.
According to the Commerce Department's Census Bureau, the goods trade gap expanded by 18% to $122.1 billion last month. Imports surged by $10.8 billion to $289.6 billion, while exports declined by $7.8 billion to $167.5 billion.
President Trump has vowed to impose or significantly increase tariffs on imports from countries such as China, Canada, and Mexico. The widening trade deficit suggests that trade continued to weigh on gross domestic product (GDP) in the fourth quarter, having subtracted from GDP for three consecutive quarters.
The government is set to release its advance estimate of fourth-quarter GDP on Thursday. A Reuters survey anticipates GDP growth of 2.6% at an annualized rate in the last quarter, following a 3.1% growth rate in the July-September quarter. The economy continues to expand well above the 1.8% growth pace considered non-inflationary by Federal Reserve officials.
The Federal Reserve is expected to maintain its benchmark overnight interest rate within the 4.25%-4.50% range at the conclusion of its two-day policy meeting on Wednesday. The bank has cut the rate by 100 basis points since September, following a 5.25 percentage point increase in 2022 and 2023 to address high inflation.