Tariff-Frontrunning Sparks evidence Trade Deficit In March

The US trade deficit widened to a record in March as companies rushed to import products as the Trump administration readied sweeping tariffs.

The goods and services trade gap grew 14% from the prior month to $140.5 billion (notably higher than the median estimate of a $137.2 billion deficit)

The value of imports jumped 4.4% to a record $419 billion, while exports edged up just 0.2% as firms scrambled to get ahead of President Trump’s 'Liberation Day’ tariffs….

As a reminder, the figures aren’t adjusted for inflation.

Both Goods and Services deficits increased. Imports of consumer goods climbed by the most on record, while inbound shipments of capital equipment and motor vehicles also increased.

Oil & Gas exports topped import by a record in March while imports of Chemicals relative to exports exploded to a record high…

Interestingly, while the trade deficit with Canada and Mexico shrank, Mexico’s trade deficit surged to a record high. The gap with Ireland surged to $29.3 billion as Goods imports from the EU surged amid a likely pull-forward in imports of pharmaceutical goods from the region.

Imports from transshipment hubs surged, likely as some imports from China were diverted to third countries. Imports from Vietnam and Thailand rose well above the 75th percentile of their year-to-date pace.

Of course, the gold arbitrage that we have discussed in detail also has some impact on this data. As a reminder, GDP fell an annualized 0.3% in the January-March period, with net exports subtracting nearly 5 percentage points – the most on record.

But as Goldman Sachs pointed out, this tariff-front running surge in imports as American firms stocked up on inventory, will reverse in Q2 (Bloomberg Economics sees the import surge from tariff front-running easing, based on a drop in container shipping from China to the US since April 16)…

… prompting a resurgence in the headline GDP data.