US Trade Deficit Surges in December
The US trade deficit widened sharply in December, rising nearly 33% to $70.3 billion, marking the second consecutive monthly increase and capping off a year defined by tariff uncertainty and volatile trade flows.
According to data released by the Commerce Department’s Bureau of Economic Analysis, the full-year 2025 trade deficit in goods and services totaled $901.5 billion — almost identical to 2024’s $903.5 billion.
Despite sweeping tariff announcements and shifting policy rhetoric throughout the year, the headline trade balance showed little structural change.
A Year of Volatility, Little Net Movement
Throughout 2025, trade deficits swung dramatically month to month as importers reacted to evolving tariff timelines.
Early in the year, many US companies accelerated purchases of foreign goods ahead of anticipated duties, temporarily widening the trade gap. Later months saw partial narrowing before the deficit expanded again toward year-end.
December’s reading was driven by large swings in several categories:
- Gold trading
- Pharmaceutical imports
- Telecommunications and IT equipment
Imports of telecommunications equipment alone rose by $1.3 billion, contributing to the widening.
At the same time:
- US exports fell by roughly $5 billion to $287.3 billion
- Imports increased by $12.3 billion to $357.6 billion
For the year, goods imports reached approximately $3.4 trillion, underscoring the continued strength of foreign sourcing despite tariff pressures.
China Deficit Falls — But Shifts Elsewhere
One of the notable changes in 2025 was a narrower trade deficit with China.
- 2025 US-China trade deficit: $202.1 billion
- 2024 US-China trade deficit: $295.5 billion
However, the gap did not disappear — it shifted.
Trade deficits widened with:
- Vietnam
- Mexico
- Other Asian manufacturing hubs
This reallocation reflects evolving supply chains rather than outright contraction of imports. Production has diversified geographically, but overall trade imbalances remain substantial.
Meanwhile, goods exports to Canada fell to their lowest levels since 2022 following prolonged trade tensions.
GDP Impact Remains Limited
Despite December’s jump, economists do not expect the trade swing to materially alter fourth-quarter GDP projections.
Capital Economics noted that the widening deficit leaves their Q4 growth estimate unchanged at 3.4% annualized, suggesting domestic economic momentum remains intact for now.
Still, trade remains a wild card for 2026.
Policy Uncertainty Still in Play
The December data arrived amid continued debate in Washington over tariff effectiveness and cost distribution.
A recent New York Federal Reserve analysis suggested that roughly 94% of tariff costs were borne domestically in the first eight months of 2025 — a finding disputed by the White House.
Markets are also awaiting a Supreme Court decision on the legality of certain broad-based duties, which could further shape the trade landscape.
Meanwhile, policymakers have predicted that the trade deficit could eventually swing into surplus territory — a feat not seen in decades.
For now, the data suggests stabilization rather than transformation.
WSA Take
Tariffs created volatility. They reshuffled supply chains. They changed headlines.
But the annual numbers barely moved.
When deficits narrow with one country and expand with another, the underlying demand story remains intact. Imports continue. Consumption continues. Capital flows continue.
The geography shifts. The totals stay stubborn.
The real question for 2026 isn’t whether trade swings month to month — it’s whether structural flows finally change, or simply reroute again.
Because so far, the global trade engine is still running.
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