Tariffs-Related Stockpiling Boosts US Goods Trade Deficit to Record High

• The U.S. trade deficit in goods widened to a record high in March as businesses ramped up efforts to bring in merchandise ahead of President Donald Trump's sweeping tariffs, suggesting trade was a large drag on economic growth in the first quarter.

• While some of the imported goods ended up in warehouses at wholesalers, economists said this would not blunt the anticipated hit on gross domestic product from the deterioration in the trade deficit.

• The report from the Commerce Department's Census Bureau prompted economists to sharply downgrade their GDP estimates for last quarter to show a steeper decline rather than growth just stalling. Goldman Sachs now sees GDP contracting at a 0.8% annualized rate while JPMorgan forecasts output declining at a 1.75% pace.

• The goods trade gap increased 9.6% to $162.0Bn, the highest on record, the Commerce Department's Census Bureau said. Economists estimated trade could have sliced off as much as 1.9 percentage points from GDP last quarter.

• Goods imports soared by $16.3Bn to an all-time high of $342.7Bn. They were driven by a 27.5% jump in imports of consumer goods. There were also solid increases in imports of automotive vehicles and capital goods. But imports of industrial supplies, which had been boosted by non-monetary gold, declined 13.5%. Food imports fell as did those of other goods.

• Economists have cautioned that imports, which are a subtraction in the calculation of GDP, could greatly exaggerate an anticipated economic slowdown in gross domestic product growth in the January-March quarter.

• Nonetheless, the uncertainty fueled by the often chaotic tariff policy, which has plunged the United States into a damaging trade war with China, is causing tremors throughout the economy. A separate report from the Conference Board showed its consumer confidence index dropped 7.9 points to 86.0 this month, the lowest reading since May 2020.

(Source: Reuters)