Following April’s trade deficit data, which showed a complete freefall in trade during the “Liberation Day” tariff month, May’s trade deficit rose by 18.7% on a monthly basis to $71.5 billion, according to the Bureau of Economic Analysis (BEA).
Imports fell only slightly, down 0.1%, barely worth mentioning, from April’s steep import decline.
This suggests that importers that were quick to shore up supplies prior to the big April 2 tariff announcement did not see any meaningful declines in May, despite 145% tariffs on China during that time.
What we are seeing right now is that Vietnam has replaced China in terms of the monthly goods deficit for May, with the U.S. recording what might be a decade-low trade deficit of just $14 billion. Meanwhile the deficit with Vietnam broke a record yet again at $14.9 billion, the BEA said on July 3.
The European Union, still in the throes of trade negotiations and dealing with Section 232 tariffs on cars, car parts, steel and aluminum, was the biggest source of the trade deficit in May, accounting for $22 billion. That figure is roughly on par with what the EU surplus normally is with the U.S. The all-time record was in March, when the deficit with the EU for the month hit $47.56 billion as companies shored up supplies before tariffs kicked in, based on Census figures.
Mexico was the second largest source of the goods deficit in May, coming in at $17.1 billion, based on BEA numbers. This is not a record for the year, but is still quite high in comparison with monthly averages in 2024 and earlier. The goods gap with Mexico usually ranges between $12 and $14 billion. These higher numbers suggest a near-shoring trend — and perhaps companies that source from Mexico normally — being nervous of future trade actions against Mexico.
Total Deficit Figures: A Closer Look
May goods and services deficit: $71.51 billion
Jan-May goods and services deficit: $522.37 billion
May goods deficit: $97.51 billion
Jan-May goods and services deficit: $649.77 billion
May services surplus: $26 billion
Jan-May services surplus: $127.41 billion*
May passenger cars deficit: $12.06 billion
May auto parts deficit: $6.82 billion
May pharmaceuticals deficit: $16.74 billion
*Of this total, roughly $106.6 billion is from intellectual property fees and financial services, which is foreigners paying for software usage and buying American securities like stocks and bonds.
Overall, the goods deficit year-to-date ending May 31 of $649.77 billion is up from $477.73 billion recorded in the same period in 2024.
Companies imported record numbers of goods between January and March, leading to monthly deficits well over $140 billion, all records. Assuming the U.S. produces monthly goods gaps of at least $75 billion for the next seven months, the total goods deficit will be $1.17 trillion.
“Barring record exports or a recession that cuts into imports, the trend of trillion-dollar goods deficits remains undeterred by recent tariff increases, suggesting three things. First, the U.S. is still the world’s go-to market. Countries and companies are willing to pay the price for access, even if it means shrinking their margins,” said Andrew Rechenberg, CPA economist. “Second, importers are continuing to stockpile goods at record levels out of fear that tariffs will rise further. And third, the current 10% global tariff is functioning more as a revenue measure than a protective one. It simply isn’t high enough to trigger large-scale reshoring of production.”
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.
Trade Deficit Rises 18.7% in May, Even with 145% Tariffs on China
Following April’s trade deficit data, which showed a complete freefall in trade during the “Liberation Day” tariff month, May’s trade deficit rose by 18.7% on a monthly basis to $71.5 billion, according to the Bureau of Economic Analysis (BEA).
Imports fell only slightly, down 0.1%, barely worth mentioning, from April’s steep import decline.
This suggests that importers that were quick to shore up supplies prior to the big April 2 tariff announcement did not see any meaningful declines in May, despite 145% tariffs on China during that time.
What we are seeing right now is that Vietnam has replaced China in terms of the monthly goods deficit for May, with the U.S. recording what might be a decade-low trade deficit of just $14 billion. Meanwhile the deficit with Vietnam broke a record yet again at $14.9 billion, the BEA said on July 3.
The European Union, still in the throes of trade negotiations and dealing with Section 232 tariffs on cars, car parts, steel and aluminum, was the biggest source of the trade deficit in May, accounting for $22 billion. That figure is roughly on par with what the EU surplus normally is with the U.S. The all-time record was in March, when the deficit with the EU for the month hit $47.56 billion as companies shored up supplies before tariffs kicked in, based on Census figures.
Mexico was the second largest source of the goods deficit in May, coming in at $17.1 billion, based on BEA numbers. This is not a record for the year, but is still quite high in comparison with monthly averages in 2024 and earlier. The goods gap with Mexico usually ranges between $12 and $14 billion. These higher numbers suggest a near-shoring trend — and perhaps companies that source from Mexico normally — being nervous of future trade actions against Mexico.
Total Deficit Figures: A Closer Look
May goods and services deficit: $71.51 billion
Jan-May goods and services deficit: $522.37 billion
May goods deficit: $97.51 billion
Jan-May goods and services deficit: $649.77 billion
May services surplus: $26 billion
Jan-May services surplus: $127.41 billion*
May passenger cars deficit: $12.06 billion
May auto parts deficit: $6.82 billion
May pharmaceuticals deficit: $16.74 billion
*Of this total, roughly $106.6 billion is from intellectual property fees and financial services, which is foreigners paying for software usage and buying American securities like stocks and bonds.
Overall, the goods deficit year-to-date ending May 31 of $649.77 billion is up from $477.73 billion recorded in the same period in 2024.
Companies imported record numbers of goods between January and March, leading to monthly deficits well over $140 billion, all records. Assuming the U.S. produces monthly goods gaps of at least $75 billion for the next seven months, the total goods deficit will be $1.17 trillion.
“Barring record exports or a recession that cuts into imports, the trend of trillion-dollar goods deficits remains undeterred by recent tariff increases, suggesting three things. First, the U.S. is still the world’s go-to market. Countries and companies are willing to pay the price for access, even if it means shrinking their margins,” said Andrew Rechenberg, CPA economist. “Second, importers are continuing to stockpile goods at record levels out of fear that tariffs will rise further. And third, the current 10% global tariff is functioning more as a revenue measure than a protective one. It simply isn’t high enough to trigger large-scale reshoring of production.”
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.
TRENDING
Trade Agreements: The Export Myth That Masked a National Giveaway
Trump Raises Southeast Asia Tariffs to Match Vietnam, But Still Cheaper Than China
Copper Crisis: Why the U.S. Must Act Now to Save Its Copper Industry
The Tariff Trump Hasn’t Tried Yet: A Market Access Charge on Foreign Capital Could Tame the Dollar and Boost U.S. Manufacturing
Tariff Truths: What the Data Actually Says About Inflation, Revenue, and Reality
The latest CPA news and updates, delivered every Friday.
WATCH: WE ARE CPA
Get the latest in CPA news, industry analysis, opinion, and updates from Team CPA.
CHECK OUT THE NEWSROOM ➔