US trade deficit widens to $105.6bn as imports hit record

The US trade deficit widened sharply to $105.6 billion in August, its highest level in 17 months, as imports surged to a record amid strong domestic demand and investment in artificial intelligence infrastructure.

The Commerce Department’s Bureau of Economic Analysis and Census Bureau said the goods and services deficit increased 13.7% from a revised $92.8 billion in July. Imports rose 4.3% to a record $420.8 billion, while exports increased 1.4% to $315.2 billion.

The August shortfall was the largest since March 2025, when the trade deficit reached a record before President Donald Trump announced a series of reciprocal tariffs on US trading partners.

AI investment helps drive record imports

Goods imports jumped as US businesses replenished inventories and increased purchases of industrial supplies and capital equipment.

Capital goods imports rose by $6.2 billion to a record $146.4 billion, led by semiconductors and other industrial machinery associated with the expansion of AI infrastructure. Imports of industrial supplies and materials increased by $9.1 billion, including higher purchases of petroleum and non-monetary gold.

Despite the sharp monthly widening, the year-to-date picture showed an improvement from 2025. The official data show that the goods and services deficit fell by $138.2 billion, or 19.9%, in the first eight months compared with the same period last year.

Oren Klachkin, Financial Market Economist at Nationwide, said higher prices made the nominal trade figures appear larger, but net trade was still likely to weigh on third-quarter gross domestic product growth.

He viewed the strong imports more as a reflection of robust US domestic demand than a sign of underlying economic weakness.

Imports are deducted when calculating GDP, although increased imports can also accompany stronger consumer spending and business investment elsewhere in the economy.

Trade expected to weigh on third-quarter GDP

The US goods trade deficit rose 10.3% to $136.6 billion in August. Adjusted for inflation, the deficit widened by $8.7 billion to $114.7 billion.

Trade has subtracted from US GDP growth for three consecutive quarters, and economists estimate that it could reduce third-quarter growth by as much as 2.5 percentage points.

Goldman Sachs economists cut their estimate for third-quarter GDP growth to an annualised 3.1% from 3.4% following the latest trade data.

The Federal Reserve Bank of Atlanta’s GDPNow model meanwhile put third-quarter growth at 3.7% following its October 6 update. GDPNow is a running model-based estimate rather than an official Atlanta Fed forecast.

The latest figures suggest that strong consumer and business demand remains a key source of momentum for the US economy, even as the resulting rise in imports threatens to restrain headline GDP growth in the third quarter.

Source: Reuters