The U.S. goods trade deficit jumped 27.4% in May as companies increased imports to guard against possible shortages and higher costs tied to conflict involving Iran and the Strait of Hormuz.
By yourNEWS Media Newsroom
The U.S. goods trade deficit widened sharply in May as American companies accelerated purchases of foreign products amid concerns over war-related supply disruptions, higher prices and uncertainty surrounding the Strait of Hormuz.
The merchandise trade gap increased 27.4% to $105.8 billion in May, up from $83 billion in April, according to Commerce Department Census Bureau data released June 26. The May deficit was the largest since March 2025 and came in well above economists’ expectations for an $85 billion shortfall.
The wider deficit reflected a combination of rising imports and weaker exports, a mix that could weigh on U.S. economic growth in the second quarter.
Imports rose nearly 4%, or $10.9 billion, to $313.4 billion in May. Much of the increase came from consumer goods and industrial supplies, which rose nearly 6% and 5%, respectively. Imports of foods, feeds and beverages increased more than 4%.
Businesses increased foreign purchases as they sought to avoid higher costs and product shortages linked to the conflict involving Iran and the Strait of Hormuz. Tehran has repeatedly threatened to close the Gulf waterway since the United States and Iran extended their ceasefire, and reports of cargo attacks have added to concerns about the security of commercial shipping.
The Strait of Hormuz is a key global chokepoint for crude oil, gasoline and other petroleum products. It also carries a wide range of goods used in daily commerce, including pharmaceuticals, fertilizer and construction supplies.
As of June 26, Marine Traffic data showed commercial vessels, including oil tankers and other ships, continuing to move through the waterway.
While imports increased, U.S. exports fell. Shipments of American goods to foreign markets declined about 6%, or $11.8 billion, to $207.7 billion in May. Consumer goods exports dropped more than 9%, while industrial supplies shipments fell 7%.
The May trade figures offer an early signal of how foreign trade may affect second-quarter gross domestic product. Net exports subtract from GDP when imports rise faster than exports, because exports add to national output while imports are counted as a subtraction in the calculation.
Net trade was already a drag on first-quarter growth, though only modestly. Net exports subtracted 0.37 percentage points from real GDP growth during the January-to-March period.
The U.S. economy expanded 2.1% in the first quarter of 2026, according to the Bureau of Economic Analysis’ final estimate released June 25. That followed a 0.5% increase in the fourth quarter.
The Atlanta Federal Reserve’s GDPNow model projects second-quarter growth at 2.5%, with net exports subtracting 0.59 percentage points from the growth rate.
Despite the May increase, the cumulative goods deficit for the first five months of 2026 totaled about $435 billion, down 31% from the same period last year.
Reducing the trade deficit has been a central part of President Donald Trump’s tariff agenda. Trump recently pointed to the administration’s trade policies as evidence that the deficit is shrinking.
“We have the biggest trade deficit cut in the history of our country,” Trump said during a June 24 speech in eastern Pennsylvania.
“That’s why you have all these factories being built,” Trump said.
“We are the hottest country in the world by a lot. I stood up to the trade cheaters, abusers, and violators of the world like no president has ever before. Now I am standing up again because Iran cannot have a nuclear weapon,” he added.
Trump cited double-digit tariffs on imports of aluminum, copper, steel and automobiles as part of the administration’s broader trade strategy.
Although the Supreme Court struck down the president’s sweeping tariffs, the United States continues collecting substantial revenue from import duties. As of June 23, the federal government had collected more than $23 billion in tariffs for the month, bringing the fiscal year-to-date total to about $253 billion, according to the Treasury Department.
Under Section 122, Trump imposed a universal 10% tariff. He had threatened to raise the global levy to 15%, but no executive order has been issued increasing the rate.
Treasury Secretary Scott Bessent said the administration remains focused on rebalancing international trade and addressing unfair practices.
“I would say the good thing about having used [International Emergency Economic Powers Act] in 2025, it allowed us very quickly to get to tariff deals or trade deals that we never would have gotten to before,” Bessent said in a June 24 interview with CNBC’s “Squawk Box.”
Bessent pointed to the trade agreement between the United States and the European Union, saying it led the bloc to dismantle non-monetary trade barriers and “unfair financing practices.” He said similar developments are occurring in China, Japan and South Korea.
Washington is also engaged in tense trade negotiations with India, Canada and Mexico.
The May trade report underscores how geopolitical instability can quickly affect U.S. import patterns. Companies moved to secure goods ahead of possible disruptions, but the resulting jump in imports, combined with weaker exports, widened the trade deficit and could reduce the contribution of trade to economic growth in the second quarter.
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