The U.S. trade deficit increased in December, capping off a turbulent year marked by tariffs that created widespread disruption but failed to make a dent in the trade deficit.
Data released by the Commerce Department showed the trade deficit for 2025 decreased by just 0.2% compared to the year prior. Imports of goods, which President Trump sought to slash using tariffs, actually reached record highs of $143.2 billion as rising demand for AI-related computer equipment fueled more imports of capital goods. Imported automotive vehicles and parts fell by $52 billion, an 11% decrease and the greatest drop for any imported good. Annual exports increased by 6.2% with nonmonetary gold surging. By the year’s end, the average tariff rate jumped to 13% from 2.6% in January.
Trump often measures the country’s economic strength using the trade deficit. Using the indicator that way, the annual numbers deceptively imply that U.S. trade and the broader economy changed very little over 2025. Yet Trump’s tariffs undoubtedly had a significant impact on the economy, albeit by unintentionally increasing costs for U.S. businesses and consumers.
Trump sold tariffs as a fee that would be paid primarily by foreign exporters, but more than 90% of cost burden actually fell on U.S. importers, according to research published last week by the Federal Reserve Bank of New York. Fearful of damaging customer relationships, U.S. businesses have absorbed much of these tariff costs at varying rates across industries. Importers passed on 24% of the tariffs onto US consumers for retail products in October 2025.
For December, the trade deficit for goods and services rose to $70.3 billion, nearly a third more than the deficit in November. Despite imported pharmaceuticals decreasing by $4.6 billion, imports for both goods and services increased by $15.7 billion. Exports for December in contrast declined by $5 billion as nonmonetary gold halved.
The rising costs of imports have yet to substantially increase consumer prices, as evidenced by the consumer price index rising just 2.4% in the past year. While relieving some fears that tariffs would cause a sudden and dramatic price hike for American consumers, a gradual price increase may occur once businesses decide to pass higher costs on to consumers to ease financial pressure.
“As [U.S. businesses] continue to absorb it and additional headwinds [appear] for companies, they’re starting to have to pass it on [to customers],” said Kyle Peacock, principal of Peacock Tariff Consulting in Toronto. “They can’t continue to absorb it in a short amount of time.”
China has been one of the main targets in Trump’s foreign economic policy. American companies imported less from China, but the dependence on imports remained as those importers shifted their focus to other nations. Placing tariffs on Chinese imports helped reduce the U.S. trade deficit with the country by 31%. Tariffs further discouraged overall trade between China and the U.S. as import and export values fell dramatically in 2025, with the drop in Chinese imports exceeding that in exports by 33%. Christopher Hanes, an economics professor at Binghamton University, attributed the overall decline in trade to basic macroeconomic theory: “[By placing tariffs,] it’s necessarily going to reduce foreign purchases of American goods.”
The recent trade numbers may be the last thing currently on Trump’s economic agenda. Days after the trade deficit numbers’ release, the Supreme Court issued its ruling declaring the tariffs invoked by Trump under the International Emergency Economic Powers Act (IEEPA) unconstitutional. Tariffs stood to generate $319 billion in annual revenue for the 2026 fiscal year, according to estimates made by The Budget Lab. This past week, Trump imposed a new set of tariffs, including a 10% global tariff. The administration cited Section 122 of the Trade Act of 1974, which limits the tariffs to be effective for only 150 days.