The October trade deficit fell by 39% for goods and services combined, but even the goods deficit fell to monthly numbers not seen in at least five years. The October deficit in goods was $59.14 billion, down 24.5% from September, the Bureau of Economic Analysis said on Thursday.
These numbers should not be a total shock. The International Emergency Economic Powers Act (IEEPA) tariffs were on pause for months, then went into effect in August. The goods gap has been shrinking month over month ever since those tariffs were then imposed. Still, despite the much lower goods deficit in October, 2025 will still see a $1 trillion-plus goods gap with the rest of the world due to massive import flow in the first quarter of 2025 ahead of Trump’s IEEPA announcement on the world. This rose again in July, the last month for the IEEPA tariff pause that Trump allowed for shortly after announcing them.
If the IEEPA tariffs were to remain intact this year, we will likely see an average of monthly deficits in the $50 billion to $70 billion range, taking the deficit below a trillion dollars. But if those tariffs are deemed illegal by the Supreme Court, the Trump administration’s tariff strategy will need a fast reboot as revenue will be lost. The Section 232 tariffs will remain, and then there will be the question of whether Trump will raise tariffs on the 232s, especially for cars and car parts, which were lowered to 15% for Europe, Japan and South Korea.
The Supreme Court decision on IEEPA is expected on Friday. In other words, more tariff uncertainty is likely in early 2026.
“The January to October goods import level is still ahead of last year and with an effective tariff rate on all goods ranging between 12% and 16% is not enough to reduce imports over time,” said Jeff Ferry, CPA Chief Economist Emeritus. “Trump’s instincts are correct when he said maybe children should make do with two dolls instead of 30. But to lower imports, we need more investment in plants and equipment to drive reshoring. Unfortunately, pushing for lower interest rates combined with a trillion dollar federal budget deficit will not get us there,” he said.
Overall, the U.S. goods deficit is now $1.06 trillion. Assuming a $60 billion deficit in November and again in December, the U.S. will post a $1.26 trillion deficit for 2025, bigger than that of $1.21 trillion for 2024.
October Trade Snapshot: Top Exports, Top Imports
Two of the biggest exports for the U.S. in terms of value were crude oil and pharmaceutical drugs. The U.S. exported over $11.77 billion in pharmaceuticals, versus $8.8 billion in crude oil. Even liquefied natural gas (LNG), a constant headline in trade articles, was only $2.78 billion.
The U.S. trade gap in pharmaceuticals tightened substantially to around $2 billion in October, with some $13.86 billion in imports versus $28.1 billion in September.
Tariffs on cars and car parts have not made much of a dent on imports. BEA data shows similar numbers to previous months. This could be due to the fact that USMCA cars are still duty free.
Country-Wide Deficits
Call it decoupling or derisking, but whatever it is that is happening in China is leading to record low trade deficits with the No. 2 economy. Mexico has surpassed China yet again. Vietnam is rising as a China outpost and new go-to hub for multinationals who have long picked Vietnam as their China-Plus-One country of choice.
Country
October 2025
September 2025
Jan-Oct 2025
Mexico
$18.39 billion
$17.38 billion
$164.81 billion
Taiwan
$17.42 billion
$10.47 billion
$111.87 billion
Vietnam
$16.25 billion
$16.51 billion
$145.76 billion
China
$14.93 billion
$15.03 billion
$175.41 billion
Thailand
$7.45 billion
$6.99 billion
$56.13 billion
Tariffs are changing the trade picture. The deficit with the European Union in October fell by $10 billion to $7.95 billion. The EU is one of the biggest sources of the U.S. trade deficit, mostly due to pharmaceuticals, capital goods, and automotive.
The goods deficit with Canada is also shrinking, this time by nearly half in October to $1.91 billion versus $3.81 billion in September. This may be due to steel and aluminum tariffs.
The U.S. recorded a roughly $14.5 billion deficit with all the countries of the Americas, with Mexico leading by far. The U.S. has a goods surplus with most South American countries. Asian countries, with the exception of Australia and Singapore, are the biggest source of the goods deficit. Low wages and China-state capitalist policies keep that in place. Asia accounts for nearly half of the goods deficit, currently sitting at $409.57 billion for the year.
“Tariffs are clearly affecting trade flows, but the data remain distorted by front-loading and policy uncertainty. The post-IEEPA decline in the goods deficit is real, but it is layered on top of an early-year import surge that virtually guarantees another trillion-dollar goods gap,” said Mihir Torsekar, CPA Senior Economist. “If the Supreme Court invalidates IEEPA, expect stockpiling to resume and any recent progress to evaporate. Tariffs can slow the damage, but they are not sufficient on their own to rebalance trade; that requires sustained investment in domestic productive capacity.”
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
October Trade Deficit Falls 39%, Lowest In Years, But U.S. Will Still Surpass $1 Trillion Goods Gap In 2025
The October trade deficit fell by 39% for goods and services combined, but even the goods deficit fell to monthly numbers not seen in at least five years. The October deficit in goods was $59.14 billion, down 24.5% from September, the Bureau of Economic Analysis said on Thursday.
These numbers should not be a total shock. The International Emergency Economic Powers Act (IEEPA) tariffs were on pause for months, then went into effect in August. The goods gap has been shrinking month over month ever since those tariffs were then imposed. Still, despite the much lower goods deficit in October, 2025 will still see a $1 trillion-plus goods gap with the rest of the world due to massive import flow in the first quarter of 2025 ahead of Trump’s IEEPA announcement on the world. This rose again in July, the last month for the IEEPA tariff pause that Trump allowed for shortly after announcing them.
If the IEEPA tariffs were to remain intact this year, we will likely see an average of monthly deficits in the $50 billion to $70 billion range, taking the deficit below a trillion dollars. But if those tariffs are deemed illegal by the Supreme Court, the Trump administration’s tariff strategy will need a fast reboot as revenue will be lost. The Section 232 tariffs will remain, and then there will be the question of whether Trump will raise tariffs on the 232s, especially for cars and car parts, which were lowered to 15% for Europe, Japan and South Korea.
The Supreme Court decision on IEEPA is expected on Friday. In other words, more tariff uncertainty is likely in early 2026.
“The January to October goods import level is still ahead of last year and with an effective tariff rate on all goods ranging between 12% and 16% is not enough to reduce imports over time,” said Jeff Ferry, CPA Chief Economist Emeritus. “Trump’s instincts are correct when he said maybe children should make do with two dolls instead of 30. But to lower imports, we need more investment in plants and equipment to drive reshoring. Unfortunately, pushing for lower interest rates combined with a trillion dollar federal budget deficit will not get us there,” he said.
Overall, the U.S. goods deficit is now $1.06 trillion. Assuming a $60 billion deficit in November and again in December, the U.S. will post a $1.26 trillion deficit for 2025, bigger than that of $1.21 trillion for 2024.
October Trade Snapshot: Top Exports, Top Imports
Two of the biggest exports for the U.S. in terms of value were crude oil and pharmaceutical drugs. The U.S. exported over $11.77 billion in pharmaceuticals, versus $8.8 billion in crude oil. Even liquefied natural gas (LNG), a constant headline in trade articles, was only $2.78 billion.
The U.S. trade gap in pharmaceuticals tightened substantially to around $2 billion in October, with some $13.86 billion in imports versus $28.1 billion in September.
Tariffs on cars and car parts have not made much of a dent on imports. BEA data shows similar numbers to previous months. This could be due to the fact that USMCA cars are still duty free.
Country-Wide Deficits
Call it decoupling or derisking, but whatever it is that is happening in China is leading to record low trade deficits with the No. 2 economy. Mexico has surpassed China yet again. Vietnam is rising as a China outpost and new go-to hub for multinationals who have long picked Vietnam as their China-Plus-One country of choice.
Country
October 2025
September 2025
Jan-Oct 2025
Mexico
$18.39 billion
$17.38 billion
$164.81 billion
Taiwan
$17.42 billion
$10.47 billion
$111.87 billion
Vietnam
$16.25 billion
$16.51 billion
$145.76 billion
China
$14.93 billion
$15.03 billion
$175.41 billion
Thailand
$7.45 billion
$6.99 billion
$56.13 billion
Tariffs are changing the trade picture. The deficit with the European Union in October fell by $10 billion to $7.95 billion. The EU is one of the biggest sources of the U.S. trade deficit, mostly due to pharmaceuticals, capital goods, and automotive.
The goods deficit with Canada is also shrinking, this time by nearly half in October to $1.91 billion versus $3.81 billion in September. This may be due to steel and aluminum tariffs.
The U.S. recorded a roughly $14.5 billion deficit with all the countries of the Americas, with Mexico leading by far. The U.S. has a goods surplus with most South American countries. Asian countries, with the exception of Australia and Singapore, are the biggest source of the goods deficit. Low wages and China-state capitalist policies keep that in place. Asia accounts for nearly half of the goods deficit, currently sitting at $409.57 billion for the year.
“Tariffs are clearly affecting trade flows, but the data remain distorted by front-loading and policy uncertainty. The post-IEEPA decline in the goods deficit is real, but it is layered on top of an early-year import surge that virtually guarantees another trillion-dollar goods gap,” said Mihir Torsekar, CPA Senior Economist. “If the Supreme Court invalidates IEEPA, expect stockpiling to resume and any recent progress to evaporate. Tariffs can slow the damage, but they are not sufficient on their own to rebalance trade; that requires sustained investment in domestic productive capacity.”
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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