US trade deficit hits highest since March 2025, widens 24.4% to $88.6 billion in July as imports drive AI boom | Today’s news
The US trade deficit widened sharply in July to the highest level since March 2025 as strong demand for technology products linked to the build-up of artificial intelligence boosted imports.
The trade deficit widened 24.4% to $88.6 billion in July from $71.2 billion in June, according to data released Thursday by the Commerce Department’s Bureau of Economic Analysis and the Census Bureau.
The increase was due to faster growth in imports than exports. Imports rose 2.8% to $399.3 billion, while exports fell 2.1% to $310.7 billion.
Artificial intelligence boom raises imports
The increase in imports was led by capital goods, reflecting continued investment in AI infrastructure. Imports of capital goods jumped from $14.4 billion to a record $140.3 billion, driven by higher shipments of computers, computer accessories and semiconductors.
Merchandise imports rose 3.7% to $320.6 billion in July. The increase underscores how strong domestic demand, including business investment in artificial intelligence, is being met in part through foreign-made technology products.
However, imports of industrial supplies and materials fell by $1.8 billion, with crude oil imports down by a similar amount amid lower prices.
Exports moved in the opposite direction. Merchandise exports fell 3% to $201 billion, led by an $8.7 billion drop in industrial supplies and materials, mainly oil and non-monetary gold.
Record business gaps with key partners
Despite President Donald Trump’s sweeping tariffs, the US has run record trade deficits in goods with several major trading partners.
The deficit with Taiwan, a key global center for semiconductor manufacturing, hit a record $20.7 billion in July. The trade gap with Mexico, Vietnam, Thailand, South Korea and Malaysia also reached record levels.
The numbers underscore the challenge facing the Trump administration as it seeks to reduce America’s dependence on foreign goods while encouraging domestic investment in technologies that rely heavily on global supply chains.
The U.S. goods trade deficit widened 17.3% to $119.6 billion in July. Adjusted for inflation, the goods deficit increased by 12.7% to $106.4 billion.
Trump’s tariffs and semiconductor plans
Trade flows have fluctuated sharply since Trump returned to the White House and imposed blanket tariffs on America’s trading partners.
Although the Supreme Court struck down many of Trump’s global tariffs in February, the administration replaced them in July with new tariffs covering 60 trading partners. Businesses also ramped up imports ahead of the tariff hike, contributing to fluctuations in the monthly trade figures.
Commerce Secretary Howard Lutnick said Wednesday that the administration is considering new tariffs targeting semiconductors.
“What you’re going to see is a targeted, thoughtful tariff policy that basically says if you build here, you don’t pay,” Lutnick told CNBC, signaling that companies making chips and other technology products in the U.S. could get preferential treatment.
A separate US trade investigation involving 16 trading partners, including China, the European Union and Taiwan, could also lead to additional tariffs.
Trade threatens growth
A widening trade deficit could represent another drag on the growth of the US economy in the third quarter.
Trade has already subtracted 1.14 percentage points from GDP growth in the April-June quarter, when the economy expanded at an annualized rate of 1.5%.
The latest figures suggest that strong domestic demand continues to support imports even as the Trump administration attempts to reduce the trade gap through tariffs and policies aimed at encouraging domestic production.
Services trade provided a small offset in July. Imports of services fell by $0.6 billion to $78.7 billion, while exports of services fell by $0.4 billion to $109.7 billion.
