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Key Takeaways
- The U.S. trade deficit fell by nearly 40% in October, hitting its lowest level since 2009.
- But a big increase in non-monetary gold exports, along with a steep decline in pharmaceutical chemical imports, are responsible for much of the shift.
- The declines follow the introduction of a sweeping new set of tariffs in August, though economists said tariffs may not have had much of an impact on the trade balance as expected.
The U.S. trade deficit dropped sharply in October, but the narrowing appears to be tied to a large spike in the export of gold and silver.
The trade deficit came in at $29.4 billion, a near 40% drop from the prior month’s levels. That’s the lowest reading since 2009, when the U.S. was still embroiled in the financial crisis. Economists surveyed by The Wall Street Journal and Dow Jones Newswires expected an increase in the trade deficit.
Why This Matters
A sudden swing in the U.S. trade deficit matters because net exports drive GDP, influence the dollar, and shape expectations for interest rates and corporate earnings. Understanding whether the change reflects lasting shifts in production and demand or one-off movement in commodities helps households and markets judge the durability of economic growth.
Instead, imports in October dropped by more than 3%, while exports surged by 2.6%. But that activity was concentrated in certain sectors.
Gold Exports Surge on Rising Prices
Exports of non-monetary gold and other precious metals surged by more than $10 billion in October, offsetting declines elsewhere and accounting for more than the total $7.1 billion rise in exports that month. The spike came as gold hit a then-record high on Oct. 20, part of a recent trend of investors piling into the safe-haven asset.
“Ultimately this sharp narrowing in the October trade deficit is almost entirely due to the movement of gold,” wrote Wells Fargo economists Shannon Grein and Tim Quinlan.
Meanwhile, the decline in imports can also be tied to a different segment: pharma. The $14.3 billion decline in pharmaceutical preparation chemical imports was more than the overall $12.1 billion drop in imports reported by the Bureau of Economic Analysis.
Positive, But Not ‘Massive,’ Boost in GDP Expected
While the decline in the trade deficit is expected to have a positive impact on the economy, it’s unclear how much, Wells Fargo economists said.
“The rub is, this overstates the true narrowing in the trade deficit today mainly because the BEA adjusts these flows to discount any transfer of metal related to investment purposes in GDP accounting,” the Wells Fargo economists wrote. “This surge in exports will not translate to a massive boost to Q4 GDP growth of this magnitude.”
The data release, which was delayed by last year’s government shutdown, comes after President Donald Trump introduced a new slate of reciprocal tariffs in August, which raised the costs of some imported goods. These tariffs have come under a court challenge, raising uncertainty over whether they will remain. While tariffs are having some impact, Wells Fargo economists said that some trade is being rerouted through countries with which the U.S. has trade pacts, like Mexico and Canada.
“We still believe trade flows are somewhat normalizing from tariff-influenced decision-making early last year,” they wrote.
