The 6-month average trade deficit in goods fell to $80 billion, the least-bad since 2020.
By Wolf Richter for WOLF STREET.
The Census Bureau released the trade figures for February today, and they were another step in the right direction. The trade deficit in goods at $57 billion in February, was down by 52% from the trade deficit in February last year ($120 billion) and down by 58% from the tariff-frontrunning peak in March last year ($136 billion) just before the vast majority of tariffs kicked in. But monthly trade figures are very volatile. The 6-month average irons out those monthly ups and downs and shows the trend.
The 6-month average trade deficit in goods fell (improved) to $80 billion in February, the least-bad since September 2020, and down by 37% from the 6-month-average peak in March 2025. The tariffs are doing their job!
Since a trade deficit is a negative in the GDP calculation, it is shown here as negative figures, representing US cash flowing out of the US to other countries.
The tariffs are supposed to accomplish two goals: 1. Reduce the massive and unsustainable trade deficit in goods driven by the tsunami of imports; 2. Raise taxes from companies that continue to import anyway.
Here we’re looking at the first of those two goals: an improvement in the unsustainable trade deficit in goods. Tariffs are applied to goods, not to services. The future of the tariffs still hasn’t been etched into stone. But the effects so far are becoming clearer: a substantial reduction in imports of goods, and a big improvement in the massive and unsustainable trade deficit in goods.
Shifting supply chains and production to factories in the US is a slow process, especially when it involves building new factories or expanding existing factories. These projects take years from being first decided to actually starting mass-production. What has shown up over the first 10 months of the tariffs so far is the low-hanging fruit.
Imports of goods fell to $255 billion, the least-bad since December 2023.
The six-month average of imports improved to $270 billion, down by 11% from the peak of the six-month average in March 2025 ($302 billion), and a level first breached on the way up in mid-2022.
Imports are a negative in the GDP calculation and are expressed here in negative figures.
Exports of goods have been ticking higher, but they’re not nearly high enough to balance out the flood of imports. In dollar terms, the US is a big exporter of pharmaceutical products; energy products and petrochemicals; civilian aircraft, aircraft engines, and parts; machinery and industrial equipment; vehicles and parts; periodically nonmonetary gold; and many other products.
In February, exports rose to $196 billion, the second highest since October. The six-month average rose to a record $190 billion.
Exports are a positive factor in the GDP calculation and are expressed in positive figures here:
The combination of even slowly rising exports and rapidly falling imports produced the sharp improvement in the trade deficit in goods (first chart above).
And in case you missed it: Status of US Dollar as Global Reserve Currency: USD Share Drops to 31-Year Low as Central Banks Diversify into Other Currencies & Gold
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Any thoughts about the tariff refund issue?
Wait and see. But it has zero to do with these trade figures here. It has to do with the US budget and debt.
The US macroeconomic situation is so fundamentally poor – and the “money print/rate strangulation” “fix” is so played out (explicit, toxic inflation resulting from last go round…following 20 years of ZIRP Russian Roulette that barely managed to avoid *explicit* inflation until it…didn’t) that regardless of what the Courts determine/enforce/etc, DC is going to *have to* stick with some/any variation of the tariffs.
There is a reason why Biden never undid the first round of Trump tariffs – they were helping to undo the long-term macro threat (ie,
1-perpetual trade deficits financed with
2-perpetual fiscal deficits made possible by
3-frequent money printing,
4-eventually, inevitably resulting in inflation).
That death spiral has finally made itself felt and the US is out of lies it can tell itself (financing trade deficits with printed money, ultimately)
The same dynamic is going to apply here – some/any variation of the tariffs are going to be kept in place by Trump, his successor, or the Congress (if things are so desperate that Congress has to locate its balls after decades of avoiding adult decisionmaking).
I agree with that. I’m not as much of a doomer as some others, but I do think the “We’re a very rich country that can afford a stable middle-class lifestyle for everyone” jig is up.
Totally agree on that. The problem in a few years is that all the people who were implicitly promised a stable middle-class lifestyle if they just got a college degree and showed up are growing seriously restless with the inability to obtain said lifestyle.
They already threw the bums out in 2024, they will throw this set of bums out in 2028 when they fail to deliver. Eventually, the voters run out of bums to throw out. Does anyone really think that housing prices will correct, wages will rise, and inflation will be tamed by Nov 2028?
When did we have a middle class lifestyle for “everyone”?
Was it in the 1930’s when my grandmother was working 12 hour days as hospital maid? Was it in the 1950’s when my Dad was living with three other guys in a 2 bedroom apatment after High School or was it in the 1970’s when I was in college working part time as a property manager in the day and driving a limo part time at night?
I understand that much of the exports was gold shipped for refining or to pay for Chinese products like Rare Earths
You understand nada. Just spreading braindead internet manure here.
1. Nonmonetary gold exports jumped month to month by $8 billion, to $18 billion in February. Total exports jumped to $196 billion. Despite that month-to-month jump, gold exports in February accounted for just 9% of total exports.
2. Gold exports have zero to do with IMPORTS. Tariffs target imports, not exports.
3. Gold is not used for payments 🤣 but for investment.
By my math $8 billion in gold exports accounts for ~20% of the reduction in the trade deficit. Not insignificant.
All the charts are six-month averages as are most of the figures I gave you, RTGDFA, and in the six-month average, the February monetary gold exports barely register because it was a one-month blip. In addition, there were one-month blip imports in the six-month average too.
In late 2024 and early 2025, there where HUGE monetary gold IMPORTS, and I wrote about it here, and they broke the Atlanta Fed’s GDPNow. You can see that in the spike of imports through March 2025. Some of those monetary gold imports have been getting unwound. That’s all. People are going nuts over gold.
I’m not an expert on the triffin dilemma but this rebalancing had to happen, luckily it’s happening sooner by choice rather than later by the firm grip of the invisible hand.
Just a follow-up from a comment I made here about month ago about Noem and Bondi being inept. They have both been fired.
Don’t you know the DOW was at 50,000!!!
Bobber, it was amusing when she said that. Anybody that brags about the stock market being at a record high and taking credit for it is an idiot.
Love it! Who’s next??
Thank you, Wolf! Good to see President Trump exonerated on this topic. The woke crowd is too quick to dismiss him for everything he does. His speech last night was inspiring! Next, we need to get fully behind our president on the Middle East war. He needs us now more than ever!
Wait What? Something that the president stated would be a good thing actually is working? Where is the popular press reporting this???
Some stories are starting to grudgingly get published on that, for example today in the Financial Times even (behind paywall):
“The case for Trump’s tariffs looks strong a year on from ‘liberation day’“
This war doesn’t put America First.
There are many words that come to mind regarding Trump’s speech last night. “Inspiring” is not on my list.
Yep, they don’t make Lincolns anymore…I guess even if he had a great speech write (ala Kennedy) he won’t read from it.
What caused the runup in exports and imports $ from 2020-2023?
Is that just the inflation wave making the $ amount higher but not the actual amount of goods?
I didn’t see in the article if these are inflation-adjusted $ values or not.
In the quarterly GDP data, which is adjusted for inflation, the total trade deficit (including services) nearly doubled from mid-2020 to mid-2022, adjusted for inflation.
Total net trade deficit (goods and services) as a percent of GDP is at 3%, pretty much unchanged since 2009.
That looks a bit different from this one from the GDP accounts: https://fred.stlouisfed.org/series/A019RE1A156NBEA
I’m having trouble figuring what the difference is.
So your link seems to show the portion of GDP that is made up of net exports. What would happen if net exports were balanced, where exports = imports? GDP in dollar terms would have been 4% higher in Q4 2025 than it was. That’s what I think it says.
My chart shows net exports expressed as a percent of GDP (net exports divided by GDP), which is what I thought you referred to.
But the shapes of the two charts are not too far apart because they’re related concepts.
Today is April 2nd, not April 1st.
You just broke the internet with your epiphany.
Just to check this is all tariffs, not just economic slowing? If so than good news. Glad something is going well.
I wonder how much of the gap would be filled if the corporate tax rate was increased considering how low it is. Corpos have been on the gravy train for decades now with low taxes and outsourced labor and manufacturing.
yes this and tax the billionaires back to progressive taxation. no limit on ss pay in. there fixed it for ya
Good news. It will be interesting to see how the war impacts all of this in the months to come.
I think you are too quick to dismiss the significance of non-monetary Gold exports. Granted it’s not clear what it means and people interpret it all different ways.
It would be great if Trump were more focused on these issues at home. His foreign adventures may undo all the good work at home and may leave us with President Newsom in 2028.
Trump has spooky good luck, so maybe he will come out of this mess in the Gulf ok. Impossible to predict for now.
All the charts are six-month averages as are most of the figures I gave you, and in the six-month average, the February monetary gold exports barely register because it was a one-month blip. In addition, there were one-month blip imports in the six-month average too.
In late 2024 and early 2025, there where HUGE monetary gold IMPORTS, and I wrote about it here, and they broke the Atlanta Fed’s GDPNow. You can see that in the spike of imports through March 2025. Some of those monetary gold imports have been getting unwound. That’s all. People are going nuts over gold.
Given the jump in oil prices, should we now expect the trade deficit to take a spike down, as US energy exports benefit from those higher prices?
We may see some of that in the March and April figures.
What about 3rd goal, bringing manufacturing back to the US? How’s that going?
Doing well, as you can already see in the trade figures and in the construction of factories in the US.
Just don’t expect sweatshop manual labor. All modern factories are highly automated, with relatively little labor, and what labor there is, is highly qualified labor, including tech jobs. Nevertheless, there are currently 438,000 jobs that manufacturers are trying to fill.
What factory construction? TLMFGCONS is down sharply since November of 2024 and has been trending down.
2025 was up by 192% from 2020. These are HUGE numbers. This is NOT consumption, this is investment. They will produce for decades.
https://wolfstreet.com/2026/02/28/construction-spending-on-data-centers-factories-powerplants-and-office-buildings-boom-bust-and-in-between/
Would love to see these charts without net petroleum products. Not even talking about the recent Iran price spike. The first three months had some price effect already.
Are American’s becoming better at not consuming junk? Or producing petroleum products?
This is trade data through February. Whatever happened in March will show up next month in the data.
Hope the tariffs and other things like security concerns continue to drive manufacturing back to US. We can’t have an adversary controlling entire supply chains. A good example of non tariff activity we can do which will also support building here is with internet routers- starting next year all have to be manufactured in the US, we will go from having no manufacturing of these to millions of them per year.
Yes, tariffs reduce the trade deficit. Clearly. Yes, that needs doing. Again, clearly. That said, the tariff regime by executive order we saw last year has and will continue to cost small businesses oceans more than big companies on a relative basis, and has and will put many, many small businesses right out of business. Actual nuts and bolts impementation of tariff policy at the ground level is highly complex and exacting in import procedural steps. Big companies have armies of lawyers and accountants to wade through the contracts and policy that determines what goods are subject, which are not, how much, and when. Small businesses cannot contend with the schizophrenic on/off/maybe nature of Trump’s demented policy, if you can call it that, and this has cost those small business owners a fortune. A fact that is perfectly fine with the likes of Amazon and the other mega corps. Call me woke, call me a snowflake, call me whatever you want. But I will die on this hill. Any benefit the US as a whole sees from his tariff regime is a happy accident. He is a sociopathic narcissist who cares about no one but himself. And, as usual, American mom and pops will suffer the consequences of politicians pandering to mega corporations.
It seems the tariff stuff is working…. To help everyone including small business, it might be time for our government to take a new look at antitrust/ monopoly policies. A handful of companies appear to be a bit too big and powerful.
That would probably be more beneficial overall.
With that said, I know of several small companies that are still prospering, and doing very well, even in the face of tariffs.
“The tariffs are supposed to accomplish two goals: 1. Reduce the massive and unsustainable trade deficit in goods driven by the tsunami of imports; 2. Raise taxes from companies that continue to import anyway.”
the administration also talked about the goal to keep or create manufacturing jobs. How do you reconcile the loss of approx. 100,000 jobs in manufacturing with the improved balance of trade in goods?
Hi anti-US-tariff pissed-off Canadian, how you’re doing? Been a while. How is your economy doing?
1. People who think that manufacturing in the US involves sweatshop labor need to slowly transition into the 21st century.
2. All modern factories are highly automated, with relatively little labor, and what labor there is, is highly qualified labor, including tech jobs. All manufacturers constantly try to improve automation and efficiencies to reduce their cost of labor, while increasing their output. That has been going on for decades. “Dark factories” (where you don’t have to switch on the light because there are no humans on the production floor) is what the industry is shooting for. Chip plants for example have a hugely valuable output but only minuscule production labor, though they have STEM workers in them.
3. Nevertheless, there are currently 438,000 jobs that manufacturers are trying to fill.
Not as well as it could be. Thanks for asking.
The Bank of Canada’s April 2026 outlook projects that the Canadian GDP is roughly 1.5% lower than it would have been without the trade war. Economic growth for 2026 is forecast at a modest 1.1%. Total exports are approximately 4% lower than pre-tariff levels. Damage has been limited so far by the CUSMA agreement.
Pissed off? Maybe. The US has every right to impose tariffs, but should, IMO, recognise that sometimes international trade is a great thing. I believe a Canada Mexico USA free-ish trade zone has more benefits than disadvantages. And partnership with allies goes beyond trade considerations, or at least it used to,.
USMCA-compliant products are exempt from tariffs. And that trade continues between the US, Canada, and Mexico. Take a deep breath, bother.
Speaking as another “anti-US-tariff pissed-off Canadian”, actually, our government (federally at least –spare a thought for those of us in BC suffering under NDP rule since 2017) has recently tacked to a more economically minded focus, and at least some of us are a little optimistic about the economy’s prospects for the first time in a while. Thank you for your concern.
I have never been able to wrap my mind around tariffs. The only theoretical arguments I have ever heard that convince me of anything, conclude that are that they are almost always bad.
That being said, I cannot help but think that if I went to Milton Friedman in the mid 90s and said China would become the world’s industrial superpower by 2026, more or less following exactly the policies that they indeed did, I am pretty confident he would have told me not to worry, because that that would never work. You cannot subsidize all your industries, by definition, you can only subsidize a few, and necessarily that means penalizing all the others.
Any attempt to subsidize all your industry will simply make you globally less competitive, and yet here we are, and China is in fact kicking our asses (at least for now, my bold prediction isn’t that they will finally fall flat on their faces as punishment for angering the economist gods, but simply now that they are no longer harvesting low hanging fruit, their growth will slow to a much more average pace).
I do worry though, when it comes to manufacturing at least, that it is too late. I have a small business, and we have slowly but surely started using Chinese suppliers, and not only are they incredibly cheaper, they also just know more than the companies we were buying from in North America that they replaced. Just one anecdote, but we sent them some schematics for plastic cups that we buy, and less than 48 hours later (free of charge), their engineering department sent them back with half a dozen or so changes and a bunch of explanations for why they were improvements. Some of those improvements were solving problems that we had been complaining about to our North American suppliers for years.
Mostly though, and notwithstanding that I do really hate all tariffs, why not have them that target China specifically, and continue trading with your allies –you know competitive advantage and all that?
*comparative advantage and all that?
But “bringing manufacturing back = bringing jobs” back is what every pdf voter was told.
We get more expensive toasters for what purpose?
For the supply chains that are critical to national defense, were we not protecting those to begin with?
Oh manufacturing creates lots of jobs, but not only in manufacturing. It creates jobs in construction when the factories and infrastructure are built. It creates tech jobs and design jobs. It creates jobs in other sectors, such as designing, building, transporting, installing, programming, and maintaining and repairing the industrial robots, etc. It creates supply-chain jobs, transportation jobs, jobs at utilities, restaurants, auto dealers, etc. Manufacturing is hugely important to the economy, including through its secondary and tertiary effects. Americans – including all Presidents from Reagan through Obama – have sunk into a swamp of cluelessness about manufacturing and its importance. So you’re in good company.
We need a recession to end speculation and make housing affordable to normal market forces, not Wall Street. A recession is defined as 2 quarters of negative GDP. Trade deficits count as a negative to GDP and give cheaper goods in an inflationary economy. I don’t see the problem.
The reason the US has these two huge unsustainable twin deficits, the trade deficit and the budget deficit, is because people think exactly like you: “I don’t see the problem.”
Great to see progress on trade deficit. Any news on the tariff tax revenue?
we’ll get the March tariffs revenue on the 8th working day in April.
Why look at only goods and not goods+services?
Honest question.
Because services are not tariffed. This was about tariffs doing their job.
A big if is reciprocal tariffs on U.S. farm products. Sure manufacturing has been decimated by trade deficit, but these stats don’t include service or farm commodities. Wolf touched on oil and by products. Finding a international market for soy beans is a bit more complicated.
Farmers have had subsidies for 70 years, oil has been subsidized for ever. That adds to our deficit.
Yes, so the question is; do deficits matter or not? Ben “I will never monetize the debt” Bernanke says they don’t…
Hedge accordingly.
How has oil been subsidized forever ? One of the most regulated businesses and capital intensive commodities business and of course supply of that energy is a key driver of the world’s economy . If the economy slows down energy demand quickly drops.
And now energy exports are providing a huge boost to the USA gdp plus massive spending and gdp boost domestically with LNG exports lower cost raw materials and job creation .
The energy business is key to generating a stronger economy and quality of life .
Customers paid for this, good to see them getting something for their money. Unlike taxes. How’s the debt and deficit looking again?
1. importers paid for this.
2. Annual deficit is $300 billion less bad than it would be without tariffs.
Wolf!! Do you think this as a trend will help in less money printing
There is no way the US can be anywhere near competitive in basic manufacturing with the non-developed countries. Our overall societal cost structure is simply too high.
Yes we can make our own pharmaceuticals but they will be much more expensive than India/China. So something else will “give” in our economy.
Currently, “good”manufacturing jobs really don’t pay as well as the politicians brag. Pratt and Whitney turbine blade manufacturing plant has starting pay around $25/hour with perhaps an upper cap at $35. $25/hour is $50K/year. Good luck living a “middle class” life on that, raising 2 kids and buying a house. Even with a spouse working, it’s tough. And yes there will be automation, but not 100% automation; that will never be cost competitive with a mix of manual labor and automation.
The only way the US can come remotedly close to being more competitive is to signficantly unwind much of the costly overhead in the country. This will never happen.
Good lordie. Industrial robots cost the same everywhere. Modern manufacturing is pushing automation to the max. Labor is more expensive in the US, but industrial robots are not. And the cost of labor in a product that was manufactured in a modern plant is getting smaller and smaller. In some plants, such as chip plants or chemical manufacturing, it has become irrelevant because there is so little labor involved. Manufacturing in the US lowers transportation costs, delays and lead times, theft of intellectual property, geopolitical risk — as everyone found out during the shortages — etc.
There is however an issue in the tax code: US companies can shelter their profits from foreign-produced products sold in the US at their entities in low-tax jurisdictions overseas, such as mailbox entities in Ireland. That’s why they’re manufacturing overseas. Apple has perfected this, as we know from a Senate investigation.
Can you explain this?
The total trade deficit actually widened by 4.9% in February 2026, rising to $57.3 billion from a revised $54.7 billion in January as imports (driven by AI-related capital goods) grew faster than exports.
The “Trade deficit in goods at $57 billion…” is actually the total deficit (goods and services). The goods deficit alone was much higher at $84.6 billion in February.
Data from the Bureau of Economic Analysis shows the three-month moving average for the total deficit actually increased to $61.6 billion.
While the deficit is lower than the volatile “front-running” peaks of early 2025, it has remained largely unchanged on an annual basis. The total deficit for 2025 was $901.5 billion, a negligible 0.2% decrease from 2024.
And can we please not forget the Supreme Court struck down the broad IEEPA tariffs, ruling they were unauthorized. So it wouldn’t matter anyway if “tariffs were doing their job” if it’s freakin’ illegal!
“Can you explain this? The total trade deficit actually widened by 4.9% in February 2026, rising to $57.3 billion from a revised $54.7 billion in January as imports (driven by AI-related capital goods) grew faster than exports. The “Trade deficit in goods at $57 billion…” is actually the total deficit (goods and services). The goods deficit alone was much higher at $84.6 billion in February.”
Yes, I can explain this: you’re a moron that drags stupid-ass internet bullshit into here. I deleted your comment once already, and now you post it again. And now I have to waste my time with your stupid-ass internet bullshit. It’s not my job to clean up the manure on the internet. Don’t drag it into here.
Here is the monthly trade deficit, note how $57 billion is way down from 5 years of prior deficits, though up a tiny bit from January. During the shutdown, a lot of data didn’t make it, so the deficit numbers plunged, but then the data was recaptured in the following months:
Goods only: Not seasonally adjusted, the good trade deficit plunged to -$59 billion, the lowest in five years (red). Seasonally adjusted, it was the third lowest behind only the two shutdown months:
Does the French gold sold at the NY Fed and repurchased in Europe show up as a US goods export with no corresponding import? Given that (as far as Iknow) the BdF sold on the open market rather than transferring between central banks, was it classified as non-monetary gold — and if so, was the effect on your figures negligible?
That deal itself didn’t impact US trade since the physical gold was not moved in those transactions.
France “repatriated” its gold holdings (129 tonnes) in the period from July 2025 through January 2026 by selling its gold at the NY Fed (the gold stayed there), and then buying equivalent amounts of gold bullion in Europe.
However, there were some exports of gold from the US, and they’re part of this data, just like the huge imports of gold in early 2025.
Thank you for your answer