The US trade deficit in goods and services surged to an all-time high of $140.5 billion in March 2025, according to data released by the Bureau of Economic Analysis (BEA). This marks a 92.6% year-to-date increase, as companies and consumers accelerated imports ahead of sweeping global tariff hikes scheduled for July 6 under President Donald Trump’s trade policy.
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Import Growth Outpaces Exports, Deepening US Trade Deficit
March saw U.S. imports rise by $17.8 billion, contributing to a 23.3% increase in total imports so far in 2025. In contrast, exports grew by just $500 million, widening the gap between what the U.S. sells abroad and what it buys. The jump in imports was largely driven by a surge in consumer goods, particularly pharmaceuticals, which hit record levels. Additional increases were seen in apparel, furniture, jewelry, household appliances, and textiles.
GDP Contracts as Net Exports Drag Economy
The sharp trade imbalance had a significant impact on economic growth. In the first quarter of 2025, U.S. GDP shrank by 0.3%, with net exports posting their largest drag on growth in over 50 years, according to economists at Wells Fargo. Other economic indicators also showed signs of strain, with consumer spending rising just 1.8%, the weakest pace since mid-2023.
Recession Risks Rise Despite Optimism for Q2
While economists widely expect the import surge to slow in Q2, potentially allowing GDP to rebound, recession concerns persist. Analysts at Goldman Sachs currently assign a 45% chance of a recession within the next 12 months. Goldman’s chief economist, Jan Hatzius, warned that further tariff increases could be on the horizon.
“We still expect further tariff increases in other areas e.g. pharmaceuticals, semiconductors, and potentially movies and see a meaningful risk that some of the paused ‘reciprocal’ tariffs will take effect after all,” Hatzius noted.
Canadian Trade Flows Shift Amid US Tensions
Meanwhile, Statistics Canada reported a 6.6% drop in exports to the U.S., marking the second consecutive monthly decline. However, Canadian exports to other global markets including the UK, Netherlands, Hong Kong, and Germany rose notably. Crude oil remained a top export to many of these destinations.
Conclusion
The record U.S. trade deficit in March underscores the complex consequences of impending tariffs, with businesses front-loading imports and economic metrics reflecting the impact. While a temporary slowdown in imports may help in the short term, concerns about inflation, policy uncertainty, and the risk of recession remain elevated.
