US trade deficit surges to record high

WASHINGTON: The US trade deficit widened to a record high in March as businesses boosted imports of goods ahead of tariffs, which dragged gross domestic product into negative terrain in the first quarter for the first time in three years.

The trade gap jumped 14.0 per cent to a record $140.5 billion from a revised $123.2 billion in February, the Commerce Department’s Bureau of Economic Analysis (BEA) said on Tuesday.

Economists polled by Reuters had forecast the trade deficit rising to $137.0 billion from the previously reported $122.7 billion in February.

President Donald Trump’s sweeping tariffs, including raising duties on Chinese imports to a staggering 145 per cent, fueled a rush by businesses to bring in merchandise to avoid higher costs.

While reciprocal tariffs with most of the United States’ trade partners were suspended for 90 days, duties on Chinese goods came into effect in early April, triggering a trade war with Beijing.

Imports vaulted 4.4 per cent to an all-time high $419.0 billion in March. Goods imports soared 5.4 per cent to a record $346.8 billion. Exports climbed 0.2 per cent to $278.5 billion, also a record high. Exports of goods increased 0.7 per cent to $183.2 billion.

The government reported last week that the trade deficit cut a record 4.83 percentage points from GDP last quarter, resulting in the economy contracting at a 0.3 per cent annualized rate, the first decline since the first quarter of 2022.

Economists expect the flood of imports to ebb by May, which could help GDP to rebound in the second quarter.

They, however, caution that the lift from subsiding imports could be offset by a drop in exports as other nations boycott American goods and travel. There has been a decrease in visitors to the US, especially from Canada, in protest over the punitive tariffs as well as an immigration crackdown and Trump’s musings about annexing Canada and Greenland.

Separately, Canada’s trade deficit narrowed to C$506 million ($366.34 million) in March, beating expectations as imports fell at a faster rate than the drop in exports, data showed on Tuesday.

Imports of goods dropped 1.5 per cent in March, driven by a 2.9 per cent slump in imports from the United States after Canada imposed retaliatory tariffs on its neighbor following President Donald Trump’s 25 per cent tariff on Canadian steel and aluminum from March 12.

Exports to the United States also dropped by 6.6 per cent but was almost compensated by an increase in exports to the rest of the world, Statistics Canada said.

Analysts polled by Reuters had estimated that the total trade deficit would widen to C$1.56 billion in March, up from a revised C$1.41 billion in February.

Trump’s tariff threats at the end of last year and the beginning of this year pushed Canadian firms to advance supplies south of the border, boosting trade surpluses in December and January. But as tariffs took hold, shipments to the United States have been squeezed.

The United States is Canada’s biggest trading partner and Trump’s tariffs have hurt trade, investments and jobs on both sides of the border.

Canadian Prime Minister Mark Carney will meet with Trump on Tuesday to start talks on a comprehensive trade and security deal, which experts have said could eventually lead to reducing the burden of tariffs on Canada.

Economists and analysts have said that as the impact of tariffs flow through the economy, growth would take a hit. This is already evident in investment and hiring intentions of companies and consumer spending.

The Bank of Canada has said that it would act quickly and decisively if the economy takes a sharp hit, with money markets now estimating almost a 52 per cent chance of a rate cut of 25 basis points in June.

The Canadian dollar was up 0.18 per cent to trade at 1.3801 to the US dollar, or 72.46 US cents. Bond yields for the government’s two-year bonds were down 0.5 basis points to 2.557 per cent.

Canada’s overall exports for March came in at C$69.9 billion, down from C$70.04 billion in February, led by the United States. This was the second month in a row when exports fell.

“Despite the two consecutive monthly declines, export levels remained relatively high in March, posting a 10.2 per cent increase compared with the same month a year earlier,” Statscan said, adding that lower prices primarily led to the drop.

In volume terms, exports were up 1.8 per cent in March, it said.

However, imports fell in both value and volume terms.

They dropped for the first time in five months, with the largest contributors being metal and non-metallic mineral products by 15.8 per cent and energy products by 18.8 per cent. In volume terms, total imports edged down 0.1 per cent in March.

Imports in March were at C$70.40 billion, down from C$71.44 billion.