Key Takeaways:
- US goods trade deficit jumped to $105.8B in May from $83B in April
- Capital goods imports surged 42% YoY on data center buildout demand
- Trump administration has proposed 10%-12.5% tariffs on 60 trading partners
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US trade deficit widens to $105.8B as tariff uncertainty drives stockpiling
The US goods trade deficit jumped more than $20 billion in May as companies rushed imports ahead of potentially higher tariffs and data center demand kept capital goods purchases elevated.
The US goods trade deficit widened to $105.8 billion in May from $83 billion in April, the Commerce Department said Friday, as companies stockpiled imports ahead of potential tariff increases and data center buildout sustained demand for foreign-made capital equipment.
"You're in the window after the IEEPA tariffs and before the Section 301 tariffs, so there's a nice opportunity for importers to bring in as much as possible before they might face higher tariffs," Scott Lincicome, vice president of general economics at the Cato Institute, said.
Imports of capital goods — computers, accessories and chips used in data centers — surged almost 42 percent from a year earlier, according to Census Bureau data. More than 1,500 new data centers were under development across the US as of April, Pew Research Center data shows. Retail and wholesale inventories also ticked higher in May, with consumer goods and automotive sectors leading the rebuild, said Ryan Sweet, chief global economist at Oxford Economics.
The widening deficit threatens to undermine a central pillar of the Trump administration's trade agenda, which has made narrowing the gap a key goal. The administration has proposed tariffs of 10 percent to 12.5 percent on 60 trading partners under a forced-labor investigation, while separate probes into German pharmaceutical pricing and manufacturing overcapacity could justify further duties under Section 301 of the Trade Act of 1974.
Tariff Calendar Packs July
July is shaping up as a pivotal month for trade policy, with multiple comment deadlines and hearings that will shape the administration's next moves. Public feedback is due Wednesday on the Office of the US Trade Representative's proposed 25 percent tariffs on Brazil over a raft of trade irritants, while Thursday is the deadline for comments on a similar probe into Vietnam's intellectual property protections. Companies also have until Sunday to file requests to continue some of Trump's first-term tariffs on China, which former President Joe Biden upheld and expanded.
The US-Mexico-Canada Agreement's six-year review begins July 1, with the three governments meeting virtually Wednesday. US Ambassador to Canada Pete Hoekstra said the US and Canada remain far apart on a framework, adding that any breakthrough would require direct talks between President Donald Trump and Canadian Prime Minister Mark Carney. US discussions with Mexico, which officials have described as more advanced, are set to resume next month for a third round.
The previous round of US tariff escalation under Section 301 — the 2018-2019 tariffs on roughly $350 billion of Chinese goods — reduced bilateral trade by about 15 percent over 12 months, according to Census Bureau data. The current average US tariff on Chinese goods stands at about 19 percent after the Biden administration's 2024 increases, with the proposed new Section 301 duties potentially adding another 10 to 12.5 percentage points.
Digital Regulations Targeted as Trade Barriers
The Trump administration's latest National Trade Estimates Report flagged digital regulations as trade barriers in 76 countries, up from 65 a year earlier, according to a Public Citizen analysis released Monday. The consumer advocacy group reviewed hundreds of pages of public comments submitted to USTR ahead of the March report and found that the targeted policies mirror requests from tech industry lobby groups.
The policies flagged include data protection and privacy laws in 34 countries, digital competition and antitrust laws in 12 countries, AI transparency regulations in six countries — up from just one in 2025 — and digital services taxes in eight countries. The report comes days after Trump threatened 100 percent tariffs on any country that imposes digital services taxes, escalating a long-running dispute with European nations.
On Capitol Hill, Senator Bill Cassidy, a Louisiana Republican, introduced the Home Market Restoration Act, which would create country-specific tariff-rate quotas for shrimp, crawfish, catfish, rice, honey, lamb, goat meat, live cattle and beef. Senator John Hoeven, a North Dakota Republican, told Morning Trade last week that he has been in regular contact with US Trade Representative Jamieson Greer over a forthcoming Section 301 investigation into sugar imports that could be used to justify new tariffs.
This article is for informational purposes only and does not constitute investment advice.
