The United States trade deficit soared to an unprecedented $140.5 billion in March 2024, marking a 14% increase from February's $123.2 billion, according to the Commerce Department's latest report.
The sharp rise came as American businesses rushed to boost imports ahead of President Donald Trump's new tariff policies, particularly the 145% duties on Chinese goods. Total imports reached an all-time high of $419 billion, with goods imports climbing 5.4% to $346.8 billion.
Consumer goods imports hit record levels, driven mainly by pharmaceutical preparations. The surge also included substantial increases in computer accessories and automotive vehicles. While imports from most trading partners grew, Chinese imports fell to their lowest level in five years.
Exports showed modest growth, rising 0.2% to $278.5 billion, with goods exports increasing 0.7% to $183.2 billion.
The widening trade gap had immediate economic consequences, contributing to negative GDP growth in the first quarter - the first decline since early 2022. The deficit subtracted a record 4.83 percentage points from GDP calculations.
"Businesses are clearly scrambling as they try to find a way through this time of unprecedented change," said Christopher Rupkey, chief economist at FWDBONDS, noting that the full impact of tariffs has yet to materialize.
Economists expect import volumes to decrease by May, potentially supporting second-quarter GDP. However, they warn that retaliatory measures from trading partners could offset any positive effects by reducing US exports.
While the administration focuses on trade deficits as a key economic indicator, some economists disagree with this emphasis. Ryan Young from the Competitive Enterprise Institute noted that despite running trade deficits since 1975, the US has experienced substantial economic growth and quality of life improvements over that period.