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The U.S. trade deficit soared to a record $140.5 billion in March, driven by a rush to import goods before President Donald Trump's tariffs take effect on July 6. According to the Bureau of Economic Analysis, imports rose 23.3% this year, with a $17.8 billion increase last month alone, while exports grew by only $500 million.
The impending tariffs, particularly on Chinese goods, have prompted businesses to stock up on imports, leading to a surge in consumer goods such as pharmaceuticals, apparel, and furniture. President Trump's tariffs on China, already at 145%, are expected to rise, affecting various sectors like pharmaceuticals and semiconductors.
The trade imbalance contributed to a 0.3% contraction in the U.S. gross domestic product (GDP) for the first quarter, marking the largest drag from net exports in over fifty years. Consumer spending also showed signs of slowing, with a modest 1.8% increase in the first quarter, the weakest pace since mid-2023.
Economists anticipate that the import surge will slow in the second quarter, potentially allowing GDP to rebound. However, some analysts, including those from Goldman Sachs, estimate a 45% chance of a recession within the next year. Meanwhile, Statistics Canada reported a 6.6% decline in exports to the U.S., with increased exports to other countries like the U.K. and Germany.
As businesses brace for higher costs, consumers may face increased prices once the current stock of imported goods depletes. The tariffs are expected to impact a wide range of products, potentially raising prices significantly.