US trade: Businesses front-load imports ahead of tariffs in July; deficit hits widest in 4 months

The US trade gap widened sharply in July, hitting its largest level in four months, as businesses rushed in imports ahead of fresh tariffs from US President Donald Trump.

Figures from the department of commerce on Thursday showed the deficit rose by 32.5% to $78.3 billion. Imports jumped 5.9% to $358.8 billion, while exports increased only slightly, up 0.3% to $280.5 billion.


"While imports bounced back in July, more than half of the increase was due to gold as trade policy and safe-haven demand brought about a resurgence in trade," said Matthew Martin, senior economist at Oxford Economics told AFP.

"Excluding gold, imports rose by a more modest 3.3%, while exports fell 0.1%," Martin added.

Pantheon Macroeconomics analysts described the widening shortfall as the result of "another wave of pre-tariff stockpiling."

Trump initially introduced a 10% tariff on most trading partners in April. Plans to raise these levies were postponed twice before taking effect in early August, affecting key allies such as the European Union, Japan and India.

Economists believe businesses that front-loaded imports are now running low on existing stocks, meaning they will soon face higher costs when they place new orders. For now, however, the broader impact on inflation in the US remains limited.

A Briefing.com poll of forecasters had expected the deficit to come in much smaller, at $64.2 billion.

Martin noted that strong demand for capital goods linked to artificial intelligence and data centres had also pushed up imports. The Commerce Department added that inflows of industrial supplies and consumer goods both rose strongly.

Trade with China played a significant role, with the US goods deficit widening by $5.3 billion to $14.7 billion in July.

"Unsurprisingly, given the level of tariffs, China has been the hardest hit of all trading partners," Martin said. Goods from the world’s second-largest economy are now subject to an additional 30% tariff this year, while other Asian nations face lower rates.

Trump’s tariff strategy has rattled global supply chains, with import surges recorded as early as March, before his wide-ranging duties began in April. Alongside general tariffs, Washington has also imposed separate charges on steel, aluminium and automobiles, with the White House signalling that more measures are still to come.