:max_bytes(150000):strip_icc()/GettyImages-2207587804-8427404b130c43cdbf76608c381b17e6.jpg "Total U.S. Trade Deficit Barely Budged in 2025")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2207587804-8427404b130c43cdbf76608c381b17e6.jpg)
Key Takeaways
- President Donald Trump’s tariff policies did little to shrink the overall 2025 trade deficit.
- However, deficits did fall with several major U.S. trading partners including Canada, Japan and South Korea, while the imbalance with China hit its lowest levels in nearly two decades.
- U.S. deficits with Taiwan, Vietnam and Mexico surged higher.
- On Friday morning, the U.S. Supreme Court ruled that most of the tariffs were illegal.
President Donald Trump’s tariffs helped lower the trade deficit with several major U.S. trading partners. But the total U.S. trade deficit for 2025 slipped by just 0.2%. The data was released just a day before the Supreme Court struck down most of his tariffs.
The U.S. narrowed its trade deficit in goods with China by more than 30% and drove down the trade imbalance with Canada, South Korea, Japan and Switzerland, according to new Bureau of Economic Analysis data. All are nations that have faced tariff threats from President Donald Trump, prompting some to strike trade deals with the U.S.
“It’s ultimately pretty clear that tariffs weighed on imports,” wrote Wells Fargo economists Shannon Grein and Tim Quinlan.
Why This Matters to You
Tariffs can shift where the U.S. buys goods from, but the 2025 data shows they don’t automatically shrink the overall trade deficit, especially when strong consumer and business demand keeps imports high. Trade flows can influence corporate profits, supply chains, inflation trends, currency values, and sectors like technology that are driving growth through heavy AI-related spending.
But the tariffs had a limited overall impact, reducing the trade deficit by just $2.1 billion in 2025. That’s because the overall number of imported goods increased by more than 4%, led by increasing high-tech imports amid a surge of U.S. business spending on artificial intelligence (AI).
| Goods Trade Deficit Falls for Several U.S. Trading Partners in 2025 | |||
|---|---|---|---|
| Country | 2025 Trade Deficit in Goods | 2024 Trade Deficit in Goods | Percent Change |
| China | $202.1 billion | $295.5 billion | 32% |
| Germany | $73 billion | $84.6 billion | 14% |
| Japan | $63.8 billion | $69.4 billion | 8% |
| South Korea | $56.4 billion | $65.9 billion | 14% |
| Canada | $46.4 billion | $61.9 billion | 25% |
| Switzerland | $34.3 billion | $38.3 billion | 10% |
| Italy | $30.7 billion | $44 billion | 30% |
| Austria | $12.2 billion | $13.1 billion | 7% |
| Israel | $6.7 billion | $7.4 billion | 9% |
“Trade took a roller coaster ride in 2025 as tariffs jolted flows, mostly on the import side of the ledger. But after all the tariff headlines and swings in the data, the trade deficit barely budged in 2025,” wrote Nationwide Financial Market Economist Oren Klachkin.
Tariff Threats Send China Trade Deficit to Lowest Levels in Nearly Two Decades
The U.S. narrowed its trade deficit with China by $93.4 billion last year, sending the imbalance to its lowest levels since 2006. But even then, it still ran a deficit of $202 billion with China.
The decline comes after Trump threatened tariffs of more than 100% on China before lowering them after negotiations between the two trading partners, which brought total tariff levels on U.S. trade with China to around 30%, a review by Oxford Economics showed.
The U.S. improved its trade deficit in goods with Canada by $15.5 billion, a 25% drop from 2024 levels, after it enacted additional tariffs on its North American neighbor. The U.S. trade deficit in goods with South Korea was lower by 14% and its deficit with Switzerland was down by 10%, the data showed.
The U.S. also narrowed its trade deficit with Europe, shrinking its trade imbalance with Italy by nearly 30%, and also reduced the imbalance with Germany and Austria. The U.S. also widened its trade surplus with Belgium and the Netherlands. However, its trade deficit with Ireland jumped by nearly 30%, and the trade imbalance with France also got larger.
Trade Deficit with Taiwan, Vietnam Jump as AI Imports Surge
However, the reduced deficits with China, Europe and Canada were mostly offset by increased trade deficits in goods with other partners. The deficit with Taiwan almost doubled to $146.7 billion, while the trade imbalance with Vietnam jumped to $178.1 billion, nearly matching the U.S. trade deficit with China. Likewise, the trade deficit with Mexico surged by almost 15% in 2025 to hit $196.9 billion.
The increasing deficits with Taiwan and Vietnam are a result of tariff exemptions on semiconductors and electronic products, such as smartphones and computers, noted BMO Senior Economist Sal Guatieri.
Some of that increase is tied to a surge in high-tech imports as businesses invest in AI, with computer imports jumping by 87% and computer accessory imports increasing by 42%. Meanwhile, imports of finished metal shapes more than doubled in 2025, while nonmonetary gold imports were up by 86% amid a surge in the value of the yellow metal.
