A historic collapse in imports sent the U.S. trade deficit to its narrowest level since 2023, Commerce Department data released on June 5 showed. The gap in goods and services trade fell 55.5% from March, reaching $61.6 billion in April, beating economist projections of $66 billion and reversing the sharp first-quarter deterioration.
Tariff Hikes Drive Sharp Import Decline
The record 16.3% drop in imports marked the steepest monthly decline since data collection began, driven by new reciprocal tariffs that took effect in early April. Pharmaceutical shipments, in particular, saw a steep cutback, accounting for much of the $33 billion plunge in consumer goods imports. Capital equipment, motor vehicles and industrial supplies also contributed to the pullback as companies hesitated to take on higher landed costs.
The goods-trade deficit with Ireland, a major supplier of pharmaceutical components, shrank to $9.5 billion from $29.3 billion in March. Meanwhile, the gap with China—at the center of President Trump’s tariff push—narrowed to $19.7 billion, reflecting Beijing’s diminished export flow to the U.S. Tariff disputes also weighed on trade with Canada and Mexico, trimming shortfalls there as well.
Potential Rebound Hinges on Policy Shifts
The overall narrowing sets up trade to provide a boost to second-quarter GDP after a slight drag in the first quarter. But the magnitude of that rebound remains uncertain, as the Trump administration continues to recalibrate its approach, delaying or modifying some tariff increases while also negotiating new bilateral trade pacts. Adjusted for inflation, the goods deficit fell to $85.6 billion in April, the smallest in over a year.
A Deeper Consequence for U.S. Supply Chains
While the sharp reduction in imports helped narrow the deficit, it highlights a brewing risk: sudden trade shifts can disrupt carefully calibrated supply chains and inventories. For instance, the contraction in pharmaceutical imports, though driven by tariff exposure, could also strain domestic drug production if supply chains remain inflexible. This highlights the importance for U.S. manufacturers and retailers to not only track tariff adjustments but also to map alternate sourcing strategies that maintain operational resilience in the face of policy swings.
