Rising demand for exports decreased the United States trade deficit in January as small businesses exhibited signs of short-lived stability.
The nation’s trade balance in goods and services decreased 25% to $54.5 billion, according to the latest numbers from the Department of Commerce. Total exports reached record highs at $66.9 billion, up 5.5% from the previous month. Imports decreased by 0.7% from December to $355.9 billion.
The findings offer evidence that U.S. trade continues to be dominated by growing demand for AI technology amid the global arms race. But the January figures may not accurately forecast U.S. trade given recent developments concerning the Trump administration’s tariff policies and the broader global fallout from the U.S.-Israeli attacks on Iran.
The January data “does not give us a good look into necessarily what’s really happening even in the near future,” said Karl Petrick, economics professor and associate dean of the Hult International Business School.
U.S. trade continues to live and die by AI as foreign markets largely look to the U.S. for industrial goods to build AI-related hardware infrastructure. American companies exported $2.6 billion more in computer-related products. Nonmonetary gold and precious metals, often used in AI contexts, increased by 80% and 196%, respectively. The growing demand for U.S. goods comes almost entirely from foreign demand for equipment, as exports for consumer goods dropped to their lowest level since October 2022.
Imports fell by $3.3 billion, reaching their lowest level since October 2022. Cutbacks by companies on stockpiling goods for fear of future tariffs may explain the lull. Automotive vehicles and parts continued to decline to their lowest level since February 2022, below $11.5 billion. The average goods and services deficit changed by $7.8 billion change for the three months ending in January — a fraction of the $48.6 billion swing seen over the same period last year.
The trade deficit decrease occurred as American small business owners showed greater confidence in their understanding of the current U.S. economic environment. Economic uncertainty declined in February, according to the most recent NFIB Small Business Optimism Index. The drop in uncertainty is largely driven by owners becoming more confident about making capital expenditures, creating a sense of stability for many small businesses.
Steadiness would be welcome news for companies like L.A. Burdick, a boutique chocolatier that’s struggled to adapt to changing trade rules and has seen its material costs rise due to tariffs. Demetry Albino, general manager for the company, has spent the weeks leading up to Easter ensuring each storefront stocked enough of its seasonal “Bunny Box” — a dovetail wooden gift box containing hand-molded chocolate bunnies packaged in hay. This year, Burdick’s margins narrowed as a result of higher material costs, not from imported cocoa beans, but because of packaging costs like the hand-crafted boxes that Burdick imports from South Korea and Japan.
“We’re going to be spending a lot more money on materials and things that we had gotten quite literally last year at a fraction of the price,” said Albino.
Stability would normally be a relief for American businesses, given the volatile import costs in 2025. However, the trade figures for January preceded the two seismic events in late February that affected U.S. trade: the Supreme Court’s decision overturning President Trump’s tariffs and the U.S.-Israeli attacks on Iran. Both events have already affected U.S. trade, signaling the reprieve from trade uncertainty may prove to have been short-lived.
The war with Iran triggered an energy shock, sending worldwide crude oil prices past $100 per barrel. The price of jet fuel increased by 58.4% over the following week, while diesel prices also rose. Higher fuel costs will likely increase shipping costs for importers as shipping companies look to pass the expense along.
“The energy price skyrocketing is introducing a lot of costs,” said Diya Jiang, a researcher at McGill University specializing in international trade policy. “Any business that has international exports needs to rely on stability, and they need to rely on energy to be able to transport their products.”
On the other side of the world, the Supreme Court’s ruling to strike down Trump’s IEEPA tariffs created more uncertainty for domestic businesses. Trump immediately responded to the decision by issuing a temporary 150-day 10% emergency tariff, which he later raised to 15%. Waves of businesses subsequently filed lawsuits for the $166 billion in tariff refunds. The funds may provide some financial relief, but the Trump administration has claimed that processing all refund requests could require more than 4 million man-hours.