The Goods Deficit has Surged past $100B
This article first appeared on SchiffGold.
The Trade Deficit is one of the two components of the ‘twin deficits’; the other being the federal budget deficit. The trade deficit used to be a number that received a ton of attention in the 1980s and 1990s because it was determined to be a strong gauge of the strength and weakness in the US economy. It was last positive in 1975, but big moves in the trade deficit through the 80s and 90s impacted the stock market.
Lately, not many people focus on the trade deficit numbers; however, it is still an excellent metric for identifying how the US is performing. How much more are we consuming than we are producing? It also allows us to export our inflation abroad. If the rest of the world decides to stop making things for us, then it could be an ugly transition.
The May trade deficit came in at -$78B. This is the largest trade deficit since last March when a new record trade deficit had been recorded. The record last year was being driven by the pending trade tariffs that caused importers to front-load their purchases. The surge this month, compared to April, was both an increase in Imports and a decrease in Exports.
Figure 1: Monthly Plot Detail
The table below provides detail. Goods Exports fell MoM by 5.1% or $11.2B while Goods Imports surged 4% or $12.2B. This created a surge in the Goods Deficit of 28.4% or $23.5B. Because the Services component barely increased by $0.5B, the net result was a massive increase in the total deficit of $23B to $77.6B.
Current Value compared to 1 month ago and 1 year ago | Trailing Twelve Month (TTM) Comparison | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Category | May 2026 | Apr 2026 | May 2025 | MoM % Change | YoY % Change | TTM Ending | TTM Ending | TTM Ending | TTM % Change | TTM % Change |
Export | ||||||||||
Goods | 210.6 | 221.8 | 181.8 | -5.1% | 15.8% | 2,330.6 | 2,125.9 | 2,057.3 | 9.6% | 13.3% |
Services | 107.1 | 106.3 | 100.4 | 0.7% | 6.6% | 1,263.9 | 1,192.4 | 1,090.1 | 6.0% | 15.9% |
Total | 317.7 | 328.2 | 282.2 | -3.2% | 12.6% | 3,594.5 | 3,318.3 | 3,147.4 | 8.3% | 14.2% |
Import | ||||||||||
Goods | -317.0 | -304.8 | -274.6 | 4.0% | 15.5% | -3,394.6 | -3,507.2 | -3,138.9 | -3.2% | 8.1% |
Services | -78.2 | -78.0 | -74.4 | 0.3% | 5.1% | -927.9 | -868.2 | -770.1 | 6.9% | 20.5% |
Total | -395.3 | -382.8 | -349.0 | 3.3% | 13.3% | -4,322.5 | -4,375.4 | -3,909.0 | -1.2% | 10.6% |
Net | ||||||||||
Goods | -106.5 | -82.9 | -92.8 | 28.4% | 14.8% | -1,064.0 | -1,381.2 | -1,081.6 | -23.0% | -1.6% |
Services | 28.9 | 28.3 | 26.0 | 2.0% | 11.0% | 336.0 | 324.2 | 320.0 | 3.6% | 5.0% |
Total | -77.6 | -54.6 | -66.7 | 42.2% | 16.2% | -728.0 | -1,057.0 | -761.6 | -31.1% | -4.4% |
Data as of: May 2026. Figures in Billions of $. | ||||||||||
Zooming out and focusing on the net numbers shows the longer-term trend. It really puts the current landscape into perspective. You can see the massive surge in the trade deficit from Jan to March last year as inventories were built up. It then rebounded back to pre-Covid levels before dropping again. It is clear that the current administration is adding significant volatility to these numbers. That volatility is almost entirely on the Goods side as the Services side has been sticking to trend.
Figure 2: Historical Net Trade Balance
The Services Surplus has been relatively unchanged for years now.
Figure 3: Historical Services Surplus
To put it all together and remove some of the noise, the next plot below shows the Trailing Twelve Month (TTM) values for each month (i.e., each period represents the summation of the previous 12-months). The flattening of Imports can really be seen in the bottom right corner of the chart while Exports continue to grow (top right corner). The Imports trend is changing though and seems to be pointing towards more increases.
Figure 4: Trailing 12 Months (TTM)
Despite the surge, it is actually not increasing as quickly as GDP. The TTM Net Trade Deficit as a percentage of GDP has fallen to 2.25%. This is the lowest figure since October 1999.
Figure 5: TTM vs GDP
The chart below shows the YTD values. This is through May. You can see that last year was worse at the same time last year because of the inventory surge. It will be interesting to see if this holds or the second half of the year drives a bigger surge in the deficit.
Figure 6: Year to Date
The Trade Deficit still gets very little attention, but it serves as a huge windfall and potential risk for the US. For years, foreign countries were willing to provide goods and services in exchange for USD that far exceeds what they are buying with the USD they earn.
The Tariffs initially shrank the trade deficit as intended. However, that may be ending as importers have worked through their inventory. We will monitor this data closely to see if May was a one-off or is part of a bigger trend developing.