US Trade Deficit Widens Sharply in December Amid Import Surge

The US trade deficit surged in December 2024, largely driven by a surge in imports ahead of Donald Trump's second presidential term and his promised tariffs.

According to Commerce Department data, the December shortfall in goods and services trade widened by 25% to $98.4 billion, the largest since 1960. The sharp increase in imports reflects efforts by US companies to secure products before Trump's tariffs take effect.

The trade deficit for the full year 2024 reached $918.4 billion, the second-largest in history. The year-end import surge included a rise in industrial products, as companies anticipated disruptions from potential dockworker strikes.

The Trump administration's tariffs, aimed at boosting domestic production and reducing the trade deficit, have already had an impact on America's largest trading partners. Trump's proposed 25% tariffs on imports from Canada and Mexico were temporarily suspended, while 10% tariffs on imports from China went into effect.

The latest trade data shows a slight narrowing of the goods deficit with Mexico and a widening with Canada. The deficit with China widened to $295.4 billion in 2024.

Economists argue that the trade deficit is driven by macroeconomic factors such as high US consumption and a strong dollar, which makes imports cheaper and exports more expensive. Tariffs are also contributing to the demand for the dollar.

The surge in imports was broad-based, including the largest percentage increase in industrial supplies since 1993. The US also imported more crude oil and gold.

Goods and services trade contributed minimally to GDP in the fourth quarter of 2024, after subtracting from growth for the rest of the year.