U.S. trade deficit fell to lowest level since 2009 as tariffs reshape trade

WASHINGTON – The U.S. trade deficit in goods and services shrank to $29.4 billion in October, down from $48.1 billion the prior month as the Trump administration’s tariffs reshaped global trade, data from the Commerce Department showed Thursday.

The figure was the lowest monthly trade deficit recorded since June 2009. U.S. imports have fallen while exports have remained strong, decreasing the trade deficit and seemingly accomplishing a major goal for President Donald Trump.

But economists cautioned that some of the trend resulted from temporary fluctuations in trade in certain products, like gold and pharmaceuticals. Because of a surge in imports early last year, the overall trade deficit from January to October was still up 7.7% from the previous year.

Imports in October fell 3.2% to $331.4 billion from the previous month, while exports rose 2.6% to $302 billion. Because exports grew more than imports, the U.S. trade deficit narrowed.

Mark Zandi, chief economist at Moody’s Analytics, said there was a lot of noise in the data for the month, and that gold and silver markets in particular had been “bonkers.”

Another force narrowing the trade deficit in the month was a collapse in pharmaceutical imports, he said. Drug companies stockpiled pharmaceuticals ahead of tariffs going into effect on the sector Oct. 1, though many firms were ultimately spared from tariffs.

“Cutting through the noise and getting to the underlying signal in the data, it suggests to me that the deficit is as large as its ever been,” Zandi said.

Trade flows have fluctuated wildly this past year because of Trump’s tariffs. The president announced sweeping global tariffs in April, before pausing them for several months to carry out trade negotiations. Those tariffs went back into effect Aug. 7.

On Aug. 29, the Trump administration also ended the “de minimis” exemption, which allowed foreign shipments valued at less than $800 to come into the United States tariff-free.

The administration has also imposed a variety of tariffs on products and sectors it deemed important to national security, including steel, copper and upholstered furniture. As of November, the U.S. effective tariff rate had climbed to more than 16%, the highest level since 1935, according to the Budget Lab at Yale, making it significantly more expensive for importers to bring goods into the country.

The Trump administration has pointed to the lower monthly trade deficits in recent months as evidence that its trade policies were working. Trump has long seen the trade deficit as a sign of an ailing U.S. economy. He and his supporters argue that tariffs will narrow it by boosting U.S. factory production and reducing imports.

But economists argue that bigger economic forces typically determine the size of the trade deficit, like savings rates and government spending. They have also cautioned against drawing too many conclusions from a few months of data in a particularly volatile year.

Companies imported large amounts of inventory early last year before tariffs went into effect, then subsequently reduced their purchases. The question for economists now is whether trade will return to more normal levels as company stockpiles go down or if tariffs will continue to depress imports and decrease the trade deficit.

For the year through October, exports were up 6.3% annually, while imports rose 6.6%, according to the data, which is compiled by the Census Bureau.

Tariffs could undergo more changes in the weeks to come. The Supreme Court is set to rule soon on the legality of many of the tariffs that Trump issued using a 1970s emergency law. But Trump officials have said that if those tariffs were struck down, they would use other authorities to impose new duties.

Diane Swonk, an economist at KPMG, described the monthly drop in the trade deficit as “stunning” but said that it was largely driven by trade in gold. Investors have been buying and selling gold in part to offset uncertainty related to the tariffs last year. Gold made up nearly 90% of the rise in exports in October and about 13% of the decline in imports, she said.

Americans imported slightly more passenger cars, cellphones, toys and appliances in the month. And imports of high-tech goods remained strong because of tariff waivers for the electronics sector and the building of American data centers to feed artificial intelligence demand, Swonk said.

The U.S. trade deficit with China continued to shrink in October, while trade deficits with Mexico, Thailand and Taiwan all hit record highs, in part reflecting AI-related imports.

Beyond gold and precious metals, exports of other products looked relatively weak. Shipments abroad of American aircraft, computers, soybeans and pharmaceutical goods all fell on a monthly basis in October. Soybean exports were down $3.3 billion in the year through October, as China curtailed its purchases of U.S. beans and bought from South America instead.

This article originally appeared in The New York Times.