U.S. Trade Deficit Hits Near Two-Year Low in June, Driven by Tariff Policy

By ariachiang

2025-08-06

In June 2025, the U.S. trade deficit shrank by 16% to $60.2 billion, the lowest level since September 2023. The drop surpassed analysts' expectations, marking the fifth consecutive month of reduction, reflecting sharply reduced import demand under higher tariffs. The U.S. trade deficit with China dropped to $9.5 billion, the lowest since February 2004. The June deficit narrowed further from May’s $71.7 billion.

Breakdown of Detailed Data:

  • Total imports fell 3.7% from the previous month to $337.5 billion; exports edged down 0.5% to $277.3 billion.
  • Key drivers of the narrower deficit include:
    • Imports of consumer goods declined by $8.4 billion, a sharp year-on-year drop of 12.4%, marking several months of sustained decrease.
    • Imports of industrial supplies and raw materials fell by 5.5% year-on-year to $48.0 billion.
    • Capital goods imports were stable, up just 0.6% month-on-month to $91.0 billion.
    • Capital goods exports rose 4.7% to $60.0 billion, while food, feed, and beverage exports rose 4% to $14.0 billion.
    • The U.S. trade deficit with China sharply narrowed to $9.5 billion, a substantial year-over-year decrease.

This narrowed trade deficit highlights the effectiveness of Trump administration’s tariff measures in curbing import demand, with importers adjusting inventories and reducing foreign purchases. U.S. Q2 2025 GDP rose by 3.0% annually, mainly due to declining imports, but experts warn that underlying domestic demand remains weak. Looking ahead, global trade slowdown and ongoing U.S. trade policy adjustments maintain high economic uncertainty. The trend of deficit narrowing may face challenges, with limited positive impact on the broader economy as trade and jobs face simultaneous pressure.

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