The US trade deficit narrowed in February, but the level of imports remained elevated after businesses front-loaded goods to avoid higher prices from tariffs, keeping trade on track to be a drag on economic growth in the first quarter.

The trade gap contracted 6.1 percent to US$122.7 billion (HK$957.06 billion) from a revised record US$130.7 billion in January, the Commerce Department's Bureau of Economic Analysis said on Thursday.

Economists polled by Reuters had forecast the trade deficit shrinking to US$123.5 billion from the previously reported US$131.4 billion in January.

President Donald Trump has unleashed a barrage of tariffs since returning to the White House in January.

Trump said on Wednesday he would impose a 10 percent baseline tariff on all imports to the United States and higher duties on some of the country's biggest trading partners. Fitch Ratings estimated the new tariffs were the highest in more than a century. Trump sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining US industrial base, a view not shared by economists.

Imports were unchanged at US$401.1 billion in February after increasing sharply in the prior month as businesses rushed to get goods in before the duties kicked in. Goods imports slipped 0.2 percent to US$328.9 billion.

They were pulled down by a US$4.2 billion decline in industrial supplies and materials, mostly reflecting decreases in imports of finished metal shapes and nonmonetary gold.

Industrial supplies had surged in January, accounting for most of the deterioration in the trade deficit. The rise in supplies was attributed to finished metal shapes and gold.

Consumer goods imports increased US$2.4 billion to an all-time high, lifted by cellphones and other household goods as well as pharmaceutical preparations. Imports of capital goods rose US$1 billion to a record high amid increases in computers and medical equipment. But imports of civilian aircraft fell.

Imports of services increased US$0.5 billion to a record high US$72.2 billion. There were increases in travel services and charges for the use of intellectual property.

Exports increased 2.9 percent to a record high US$278.5 billion. Goods exports soared 4.8 percent to US$181.9 billion. Industrial supplies and materials exports rose US$3 billion, with nonmonetary gold accounting for the rise. Fuel oil exports declined.

Capital goods exports increased US$2.7 billion to a record high, driven by computer accessories and civilian aircraft. Exports of motor vehicles, parts and engines increased US$1.6 billion. But exports of other goods fell US$1.3 billion. Non-petroleum exports were the highest on record.

Exports of services decreased US$0.4 billion to US$96.5 billion amid declines in transport, travel, and government goods and services. Financial services exports increased.

The inflation-adjusted goods trade deficit decreased 4.8 percent to US$135.4 billion. Though gold has accounted for much of the surge in imports so far this year, and will be excluded from the national accounts, economic growth likely braked sharply in the first quarter.

Gross domestic product estimates for the January-March quarter are mostly below a 0.5 percent annualized rate, with the chances of a contraction high. The economy grew at a 2.4 percent pace in the October-December quarter.

REUTERS

Containers are stacked at Port Liberty New York in Staten Island, New York, U.S., April 2, 2025. REUTERS

US trade deficit narrows in February