Rising exports lower US goods trade deficit

The US trade deficit in goods contracted more than expected in April as a surge in exports blunted rising imports, but economists cautioned the trend was ​unlikely to be sustainable, with businesses ramping up investment in artificial intelligence.

The advance report from the Commerce Department on Friday suggested the three-month ‌US-backed war with Iran, which has disrupted shipping in the Strait of Hormuz, had yet to have a significant impact on the nation’s trade flows. The artificial intelligence spending boom is largely dependent on imports, including computer chips.

“Seemingly relentless AI investment and growth outside the tech sector should propel imports,” said Oren Klachkin, financial market economist at Nationwide. “Export growth is likely to be relatively more subdued ​as the Iran stalemate weighs on overseas demand, though solid energy shipments will provide some offset.”

The goods trade gap narrowed 3.4 percent, or $2.9 billion, to $82.4 billion ​last month, the Commerce Department’s Census Bureau said. Economists polled by Reuters had forecast the goods trade deficit would be $86.5 billion.

Goods exports increased 4.0 percent to $219.7 billion. There was a 7.5 percent jump in exports of capital goods. Consumer goods exports shot up 7.8 percent, while exports of industrial supplies, which include ​petroleum, increased 2.1 percent.

“The oil export windfall must have been offset by higher prices for other critical materials imported from Persian Gulf nations, such as fertiliser and aluminum,” said Carl ​Weinberg, chief economist at High Frequency Economics. “So as expected, the net outcome was a bit less than the energy price spike suggests.”

A strong increase in petroleum exports is expected in the months ahead because of the Middle East conflict. The US is a net oil exporter.

Exports of motor vehicles and parts fell in April, as did those of food, feeds and beverages.

AI BOOSTING CAPITAL ​GOODS IMPORTS

Imports of goods rose 1.9 percent to $302.1 billion, driven by a 5.6 percent jump in capital goods, likely tied to AI. Imports of industrial supplies fell 1.9 percent. There were ​also sizeable declines in imports of motor vehicles and consumer goods. Economists expect the ongoing Iran war and a ruling earlier this year by the US Supreme Court striking down President Donald ‌Trump’s sweeping ⁠tariffs to boost imports this year.

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The trade deficit subtracted 1.25 percentage points from gross domestic product in the first quarter. It has been a drag on GDP growth for two straight quarters. The economy grew at a 1.6 percent annualised rate last quarter after expanding at a 0.5 percent pace in the October-December period.

“We see a risk that imports rise significantly over the next few months, as companies capitalize on the cut to tariffs on many products following the Supreme Court’s February ruling and attempt to build precautionary inventories ​to protect themselves against supply chain disruptions ​linked to the war in the ⁠Middle East,” said Oliver Allen, senior US economist at Pantheon Macroeconomics.

Business inventories have been drawn down since the second quarter of 2025. Restocking would limit the anticipated hit to economic growth from imports. The Census Bureau also reported on Friday that wholesale ​inventories increased 0.5 percent in April after advancing by 1.5 percent in March. Stocks at retailers rose 0.7 percent, matching March’s gain. Inventories at ​motor vehicle and parts ⁠dealers increased 0.9 percent after rising 1.1 percent in the prior month.

Excluding motor vehicles and parts, retail inventories gained 0.6 percent, matching the rise in March. This component goes into the calculation of GDP. Economists at Goldman Sachs left their second-quarter GDP growth estimate unchanged at a 2.0 percent rate.

Some economists, however, view rising inventories as a potential sign of slowing demand.

High inflation, fanned ⁠by the war, ​is squeezing consumer budgets. Household disposable income after adjusting for inflation has declined for three straight ​months and the saving rate fell to a four-year low in April, the government reported on Thursday.

“This could signal an unexpected slowdown of purchases, and thus the start of an economic correction,” said High Frequency ​Economics’ Weinberg. “However, we need more data to be sure of this.”