US trade deficit narrows in January as exports jump to record high

The US trade deficit narrowed sharply in January as exports surged to a record high and imports fell, a trend that if sustained, could see trade contributing to economic growth in the first quarter.

The trade gap contracted 25.3 percent to US$54.5 billion (HK$426.5 billion), the Commerce Department’s Bureau of Economic Analysis and Census Bureau said on Thursday. Data for December was revised to show the deficit widening to US$72.9 billion instead of US$70.3 billion as previously estimated. Economists polled by Reuters forecast the trade deficit shrinking to US$66.6 billion in January.

The report was delayed because of last year’s government shutdown. Trade data have been volatile amid President Donald Trump’s sweeping tariffs. The import duties, which Trump pursued under a law meant for use in national emergencies, were struck down by the US Supreme Court.

But Trump responded to the ruling by imposing a 10 percent global tariff, which he said would rise to 15 percent. The Trump administration said on Wednesday it was launching two trade investigations into excess industrial capacity in 16 major trading partners and into forced labor.

Trump has defended the tariffs as necessary to address trade imbalances and protect US industries. So far, the manufacturing rebirth has not materialized and 100,000 factory jobs have been lost since January 2025.

Exports jumped 5.5 percent to an all-time high of US$302.1 billion in January. The increase was the largest since October 2021. Goods exports soared 8.1 percent to US$195.5 billion. They were boosted by a US$9.4 billion increase in exports of industrial supplies and materials, mostly nonmonetary gold and other precious metals.

Capital goods exports increased US$5.4 billion to a record high, boosted by computers, civilian aircraft as well as computer accessories. Exports of other goods rose US$2.9 billion, also to an all-time high. But consumer goods exports decreased US$2.8 billion to the lowest level since October 2022, pulled down by a US$2.1 billion decline in pharmaceutical preparations.

Imports fell 0.7 percent to US$356.6 billion in January. Goods imports slipped 1.0 percent to US$277.3 billion. They were dragged down by a US$3.3 billion decrease in consumer goods, mostly pharmaceutical preparations. Imports of automotive vehicles, parts and engines fell US$2.8 billion amid decreases in trucks, buses and special-purpose vehicles, as well as passenger cars.

Imports of industrial supplies and materials dropped US$1.4 billion, with nonmonetary gold falling US$1.1 billion.

But imports of capital goods increased US$3.4 billion to a record high, driven by computers and telecommunications equipment, likely linked to artificial intelligence and the construction of data centers.

The goods trade deficit narrowed 17.6 percent to US$81.8 billion in January. Exports of services increased US$1.2 billion to a record high US$106.7 billion, reflecting rises in other business services, financial services and charges for the use of intellectual property. Exports of travel services fell US$0.3 billion, likely reflecting a reduction in tourism.

Imports of services increased US$0.2 billion to an all-time high of US$79.3 billion amid gains in other business services and insurance services.

Trade made a negligible contribution to the economy’s 1.4 percent annualized growth pace in the October-December quarter.

Reuters