The U.S. trade deficit in goods reached a record high in 2024, as manufacturers rushed to import goods in December ahead of possible tariffs in the new year.
The deficit in goods jumped 14% to a new record of $1.2 trillion, the Census Bureau reported Wednesday. The overall annual deficit in goods and services – President Donald Trump’s nemesis – widened to $918.4 billion, an increase of 17%.
A surge in imports by manufacturers in December in anticipation of the Trump administration bringing in tariffs as early as January was the primary cause of the jump. Though economists see the jump as temporary, it confirms that the U.S. economy is strong. The scale of the deficit however is likely to anger Trump, given his administration wants to bring down the trade deficit to “zero.”
“Data can be volatile, but this is much more than just noise. It’s definitely businesses preparing for tariffs,” said Tom Simons, chief U.S. economist at Jefferies.
The trade deficit in December jumped almost 25% compared to the month before. The import of goods in December was the highest on record at $293.1 billion, with almost all of the monthly increase due to industrial supplies and materials.
It turned out to be a key month for business planning, coming after the election of Trump but before his inauguration. With the possibility of tariffs in the new year, some U.S. manufacturers purchased more components from their foreign suppliers to prepare for any trade disruption.
The higher than usual import figures could continue through the beginning of the year as orders come in, though uncertainty around tariff decisions remains high and could impact business decisions.
In addition to tariffs, imports remain robust because of the strong U.S. economy.
“The U.S. consumer remains very, very robust,” said James Knightley, chief international economist at ING. “That’s again also fueling, or helping to fuel, the strength in imports that are coming through. I think it’s just been amplified by this tariff threat.”
Nonetheless, the scale of the deficit is likely to anger and prompt action from Trump.
In January, Trump announced tariffs against Mexico and Canada, accusing them of “ripping us off.” Last week, Trump implemented an additional 10% tariff on all goods from China. A new 25% tariff on Canadian and Mexican imports was postponed at the last minute following negotiations.
Wednesday’s data showed the largest bilateral trade deficit last year was with China at $295.4 billion, followed by the European Union and Mexico.
But shrinking the deficit will not be easy. Economists are skeptical that tariffs will quickly lead to a narrowing of the deficit and reshoring of manufacturing. Trump’s dual aims of using tariffs as a revenue source and hoping it will decrease imports are also in conflict with each other.
“Even if we had a 100% tariff on all of our imports, it wouldn’t be enough to make a meaningful dent in the trade deficit,” Simons said. “It just is not a model that has worked in the modern economy anywhere.”