US foreign trade balloons, set to drag Q1 GDP into the red

(Sharecast News) - America's shortfall on trade with the rest of the world ballooned at the start of 2025, as companies and individuals tried to front run the imposition of new trade tariffs. According to the Department of Commerce, the total trade deficit in goods and services widened by 34.0% to $131.4bn in January.

That was well ahead of the -$127.4bn shortfall that the consensus had anticipated.

Exports rose by 1.2% over the month to reach $269.8bn, but were dwarfed by a 10.0% surge in imports to $401.2bn.

Driving the surge in purchases from overseas, as in December, was an enormous $20.5bn rise in imports of finished metal shapes.

Other notable increases included a $5.2bn rise in imports of pharmaceutical preparations and a $3.0bn increase in those of computers.

Thomas Ryan at Capital Economics estimated that in real terms, imports were set to surge at an annualised clip of around 35% over the first three months of the year.

"This huge drag from net trade is what has done most of the damage to our first-quarter GDP estimate, which now stands at -2.5% annualised, as there has not been an offsetting rise in inventory build-up in the data.

"The good news is that this should reverse in the second-quarter as imports normalise without a corresponding inventory decline, which is why we are forecasting a strong rebound in GDP growth."