Biggest Export Decline Since COVID Lockdowns Unexpectedly Widens US Trade Deficit In May

The US merchandise-trade deficit widened unexpectedly in May, reaching $96.6 billion, exceeding the expected $86.1 billion. This was due to the largest drop in exports since the pandemic, with a 5.2% decrease to $179.2 billion. The decline in exports was mainly driven by a sharp drop in industrial supplies, such as crude oil. Imports, on the other hand, remained largely unchanged at $275.8 billion. It's worth noting that these figures are not adjusted for inflation. The surge in imports in the first quarter was due to US companies stockpiling goods ahead of tariffs imposed by President Trump. However, this tariff front-running is now over. The wider deficit in May suggests that trade may contribute less to second-quarter growth than initially anticipated. Prior to the latest figures, the Federal Reserve Bank of Atlanta's GDPNow estimate showed net exports contributing over 2 percentage points to second-quarter GDP. The latest trade deficit figures may impact this estimate. Overall, the trade deficit is expected to have a smaller impact on second-quarter growth than previously thought.