The U.S. trade deficit in goods and services shrank in January as a result of the Trump Administration tariffs but the future remains uncertain now that those levies have been struck down by the Supreme Court.
Data released Thursday morning showed the deficit narrowing from $72.9 billion in December to $54.5 billion, the Commerce Department reported. Imports dipped to $356.6 billion, and exports grew to a record $302.1 billion.
January’s trade numbers show that tariffs disrupted global trade and reduced the deficit. It remains unclear what happens now that Trump has replaced them with a temporary 10% across-the-board levy, as well as whether importers will be able to recover the $166 billion they paid. The war with Iran adds another layer of uncertainty, having already pushed oil prices above $100.
“Just as we started to think things were going to settle down, the war happened,” said Thomas Stockwell, associate professor of economics at the University of Tampa. “And now it has thrown everything into chaos. So we’re expecting far more volatility and far more uncertainty this year than in 2025.”
On Feb. 20, the Supreme Court ruled that the tariffs Donald Trump imposed last year under the 1977 International Emergency Economic Powers Act were illegal.
Trump then moved to substitute those tariffs with a new 10% tariff for 150 days, invoking a never-before-used Section 122 of the 1974 Trade Act. In response, 24 Democratic state attorneys general and governors filed a lawsuit on Mar. 5 asking the U.S. Court of International Trade to declare the new tariffs unconstitutional.
Trump also seems reluctant to provide returns to businesses who paid the tariffs, which infuriates American small businesses. On Mar. 6, U.S. Customs and Border Protection said that it’s not yet able to begin refunding roughly $166 billion collected in now-invalidated tariffs and outlined plans to start issuing refunds by late April.
“I heard one of the justices saying, ‘Oh, it’ll be a huge mess giving money back,’” said Jonathan Ortloff, founder of Ortloff Organ Company, which builds, restores, and maintains pipe organs. “Well, that’s no justification for keeping it. If it was illegal, they now have to figure out how to do it. So I’m in a waiting mode and just following the news.”
In 2025, Ortloff paid $5,000 in tariffs—costs he then passed on to customers by enforcing, for the first time in the company’s eleven years of operation, a “tariffs clause” in its contracts.
“Many colleagues of ours don’t have such clauses, so they had to scramble to figure out how to make up for tariffs,” said Ortloff.
The volatility that defined American trade last year shows no signs of settling. On Wednesday, the Trump administration announced a new investigation into allegedly unfair trading practices by 16 major U.S. trading partners. Although the new tariffs on global imports are currently set at 10%, Trump threatens to raise them to 15%.
The broader economic fallout is also worrying economists. “Kick in the price to $150-200 a barrel is a real danger of recession in the U.S.,” said Gary Hufbauer, senior fellow at the Peterson Institute for International Economics. “Texas will be rich, but many other parts of the country will be poor.”