San Francisco Frontiers - US trade gap plummets as Trump tariffs take hold

The White House is likely to frame the smaller deficit as a win, noting a report of its expected boost to GDP growth, although analysts warn that businesses had likely paused further imports while waiting for countries to strike deals.

The world's biggest economy logged a trade gap of $61.6 billion in the same month that Trump unveiled 10 percent levies on almost all trading partners. This was down by 55.5 percent from March, the largest decrease on record, said the Commerce Department.

In March, the overall US trade deficit widened to $138.3 billion as businesses sought to get ahead of Trump's promised duties.

But imports slumped by 16.3 percent in April to $351 billion as the blanket tariffs on US allies and competitors alike kicked in.

Goods imports in particular fell by the most on record as well.

Apart from the 10 percent levy, Trump also announced -– before swiftly pausing –- higher rates on dozens of economies including the European Union and Japan. This halt, which allowed room for trade negotiations to take place, is due to expire in early July.

Goods from China were the biggest target of Trump's during the month as the world's two biggest economies engaged in a tit-for-tat escalation that took both sides' levies on each other's products to three digits.

This brought many shipments from China to a halt before the countries reached a temporary deal to de-escalate the situation.

For now, all eyes are on talks between Trump and Chinese President Xi Jinping, amid hopes that both leaders can help bring about a longer-lasting truce.

But the state of a trade deal between both countries remains uncertain as Trump last week accused Beijing of violating the terms of their temporary agreement -- which China denied.

After a phone call with Xi on Thursday, Trump said there had been a "very positive conclusion for both countries."

Both April exports and imports involving China were the lowest since early 2020 during the Covid-19 pandemic, according to the Commerce Department.

- 'Hit pause' -

"The economy has essentially hit pause on discretionary imports and is now working off inventories as businesses and consumers delay spending and wait for clarity on tariffs," said Nationwide financial markets economist Oren Klachkin.

He added in a statement that the sharp drop in goods imports, stronger goods exports and larger services surplus narrowed the total April trade gap by the most on record.

With imports plummeting, GDP growth in the second quarter is set to rebound, said Oxford Economics senior US economist Matthew Martin.

But he warned in a note that headline growth figures "will overstate the true health of the economy."

Overall in April, US imports dropped by 16.3 percent to $351 billion on a retreat in goods shipments.

In particular, imports of consumer goods fell by $33 billion, data showed, with pullbacks in pharmaceuticals and cell phones.

US exports ticked up by 3 percent to $289.4 billion, helped by goods exports such as those of industrial supplies.

But US exports of autos and parts dropped by $3.3 billion.

Besides wide-ranging tariffs targeting different countries, businesses have also been contending with sector-specific duties that Trump has rolled out in recent months.

In March and April, the president slapped tariffs on imports of steel, aluminum and automobiles and he has since doubled the duties on both metals this month.

The overall US deficit was the smallest since 2023, according to government figures.

M.Powell--SFF