The U.S. goods trade deficit widened to a 14-month high in May as businesses sharply increased imports. At the same time, exports declined, adding further pressure to the trade balance.
Companies reportedly brought forward orders to avoid possible shortages and higher prices linked to the conflict in the Middle East. The latest figures suggest that trade could remain a drag on U.S. economic growth during the second quarter.
U.S. Goods Trade Deficit Reaches $105.8 Billion
The goods trade deficit surged by 27.4% in May to $105.8 billion, according to the Commerce Department’s Census Bureau.
This was the widest deficit since March 2025 and significantly higher than economists had expected. Analysts surveyed by Reuters had forecast a deficit of $85 billion.
The sharp increase reflected both stronger imports and a broad decline in U.S. exports.
Businesses Increase Imports Amid Supply Concerns
Recent business surveys showed that companies had been placing orders earlier than usual.
Survey sponsors linked this activity to the U.S.-led conflict with Iran, which pushed up the prices of commodities such as oil and fertilisers. The conflict also disrupted shipping through the Strait of Hormuz.
However, shipping activity through the strait reportedly improved after the United States and Iran signed a preliminary peace agreement. The development also contributed to a sharp fall in oil prices.
Even so, economists warned that the U.S. trade deficit could remain elevated. One reason is the artificial intelligence investment boom, which relies heavily on imported equipment.
AI Investment Boom Drives Demand for Imports
Carl Weinberg, chief economist at High Frequency Economics, warned that the widening trade deficit could weigh on national income and economic growth.
He said the AI investment boom would need to generate stronger services exports to offset the rising volume of imported technology and equipment.
Without such an increase, the economic benefits of the AI spending boom may be reduced by the growing trade imbalance.
U.S. Imports Hit a 14-Month High
Goods imports rose by $10.9 billion, or 3.6%, to $313.4 billion in May. This was also the highest level recorded in 14 months.
Automotive vehicle imports increased by 6.3%, while consumer goods imports jumped by 5.7%.
Consumer spending has remained resilient despite high inflation. Large tax refunds and a strong stock market performance have helped support household demand.
Capital Goods Imports Surge on AI Spending
The increase in imports was spread across several major categories.
Imports of industrial supplies, including petroleum, rose by 4.8%. Capital goods imports increased by 0.4% during the month and were 41.9% higher than a year earlier.
The sharp annual increase in capital goods imports reflected strong spending on artificial intelligence infrastructure and equipment.
Food, feed and beverage imports climbed by 4.3%. Imports of other goods rose by 11.5%.
Overall import demand has remained strong despite tariffs introduced by the Trump administration.
U.S. Goods Exports Fall Sharply
U.S. goods exports declined by $11.8 billion, or 5.4%, to $207.7 billion in May.
Consumer goods exports fell by 9.2%, while exports of industrial supplies dropped by 7%. Capital goods exports decreased by 5%, and exports of other goods declined by 6.8%.
However, some categories recorded modest growth. Food, feed and beverage exports increased by 3.9%, while automotive vehicle exports rose by 0.5%.
Trade Could Weigh on Second-Quarter GDP
Christopher Rupkey, chief economist at FWDBONDS, said the strong increase in imports would likely subtract from U.S. economic growth during the quarter.
Net trade had already reduced gross domestic product growth for two consecutive quarters before the latest data.
Before the May trade figures were published, economists were estimating second-quarter economic growth of around 2.5% on an annualised basis.
The U.S. economy expanded at an annualised rate of 2.1% in the first quarter. This followed growth of just 0.5% during the final three months of the previous year.
Overall, the May trade report points to renewed pressure from rising imports and falling exports. Strong demand for foreign goods, particularly AI-related equipment, could keep the U.S. goods trade deficit elevated and limit economic growth.
