U.S. Trade Deficit Reaches Highest Level Since Late 2022

The U.S. trade deficit expanded in May to its widest point since late 2022, according to government data released on Wednesday, as both exports and imports saw declines.

The overall trade gap increased to $75.1 billion, up from a revised $74.5 billion in April, as reported by the Commerce Department. Although this marks the largest deficit since October 2022, it was slightly less than analysts had anticipated, who had expected the gap to be the biggest in two years.

Despite resilient U.S. consumption in the face of higher interest rates, domestic demand has been waning, raising concerns about weakening export growth. In May, exports dropped more significantly than imports, with outbound shipments totaling $261.7 billion, a decrease of $1.8 billion from April. This decline was primarily driven by a $2.1 billion reduction in exports of industrial supplies and materials.

Imports fell by $1.2 billion from April, reaching $336.7 billion. The drop in imports of consumer goods by $2 billion, including a decrease in pharmaceutical preparations, was only partially offset by increases in cell phones and other household goods. Additionally, imports of autos and parts decreased by $1.5 billion. The U.S. goods deficit with China, a significant issue between the two largest economies, rose by $1.9 billion to $23.9 billion in May.

Matthew Martin, U.S. economist at Oxford Economics, noted that trade, after nearly two years of contributing positively to growth, has become a considerable burden. He pointed out that while imports have generally increased this year, exports have struggled due to a strong dollar and weak global demand, challenges that are expected to persist for some time. However, Martin anticipates that wage gains and easing inflation will help support growth throughout the year.

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