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July Trade Deficit Swells to Largest Since March 2025 as Imports Jump, Exports Drop

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July Trade Deficit Swells to Largest Since March 2025 as Imports Jump, Exports Drop

The US trade deficit surged in July to its highest level since March 2025 amid a jump in imports and a decrease in exports, official data showed Thursday.

The goods and services deficit widened 24% sequentially to $88.58 billion in July on a seasonally adjusted basis, the Census Bureau and the Bureau of Economic Analysis said. The consensus was for a deficit of $90.2 billion in a Bloomberg-compiled survey.

Imports rose 2.8% to $399.3 billion -- also the biggest since March last year -- while exports fell 2.1% to $310.72 billion, the data showed.

"This is the largest trade deficit since March 2025, when frontloading ahead (of) the implementation of tariffs by the Trump administration was in full swing," Oxford Economics US Economist Grace Zwemmer said in remarks e-mailed to.

Imports of capital good increased by $14.4 billion in July amid increases in the computer, computer accessory and semiconductor categories.

Oxford Economics attributed the strength to the ongoing artificial intelligence boom. The firm expects imports to remain strong in the coming quarters, according to the note.

"It's early in the quarter, but risks are titled toward a stronger drag from net trade," Zwemmer wrote. "We expect to see solid import growth in the near term as AI demand remains healthy and businesses need to restock depleted inventories beyond AI-related goods."

The US ran a trade deficit in goods of $27.45 billion with Mexico in July -- the biggest among its key trading partners -- compared with a $20.28 billion gap the month prior, official data showed. The deficit with China fell to $15.24 billion from $15.35 billion. The deficit with the European Union shrank to $8.94 billion from $10.9 billion.

The goods trade deficit with Canada tumbled to $3.20 billion in July from the prior month's $6.94 billion.

Last month, Canada announced retaliatory tariffs on roughly $20 billion worth of US goods, matching Washington's move "dollar for dollar" as trade tensions between the two nations escalated. Earlier, US President Donald Trump threatened to boost tariffs on Canadian cars, trucks and steel to 50% starting next year.

Earlier this year, the US Supreme Court ruled that the Trump administration lacked authority under the International Emergency Economic Powers Act to impose certain tariffs, paving the way for refunds to companies that had paid the duties.

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