The US Bureau of Economic Analysis (BEA) reported that the US trade deficit fell a whopping 55% in April to $61.6 billion. In March, the grade gap stood at a record $138.3 billion.
April exports rose $8.3 billion to a record $289.4 billion. April imports fell $68.4 billion to $351.0 billion. The decline in imports included a $33.0 billion drop in consumer goods, $8.3 billion in automobiles and auto parts, and $23.3 billion in industrial supplies.
The graphic above illustrates the sharp rise in the trade deficit, which began in December and peaked in March.
What drove this surge? Anticipating higher taxes on imports, businesses accelerated their purchases, leading to a significant influx of goods earlier in the year and a record trade gap.
Warehouses are currently stuffed with imported goods, but the jump in imports is beginning to unwind, contributing to a record reduction in the trade deficit in April.
The trade gap may continue to narrow in the coming months, but any substantial improvement is likely to be short-lived as distortions in the trade data gradually stabilize.
The sharp increase in the trade deficit during the first quarter was the primary driver behind the slight decline in Gross Domestic Product (GDP) for that period; therefore, the sharp decline in the trade gap is expected to temporarily boost GDP in the current quarter, which ends in June.
Separately, the US Bureau of Labor Statistics reported that nonfarm payrolls increased by 139,000 in May and the unemployment rate held steady at 4.2%.
Amid concerns that trade tensions and tariffs could drive inflation higher and slow economic growth, the stronger-than-expected payroll report helped ease fears—at least for now—of a sharp slowdown in job growth.
Notably, the number of federal workers declined by 22,000, marking the fourth consecutive monthly drop and the largest single-month decrease since 2020, when census workers completed their assignments and their temporary jobs were closed out.