The US trade deficit in goods contracted more than expected in April as a surge in exports blunted rising imports, but economists cautioned the trend was unlikely to be sustainable, with businesses ramping up investment in artificial intelligence.
The advance report from the Commerce Department yesterday suggested the three-month US-backed war with Iran, which has disrupted shipping in the Strait of Hormuz, had yet to have a significant impact on the nation’s trade flows.
The artificial intelligence spending boom is largely dependent on imports, including computer chips.
“Seemingly relentless AI investment and growth outside the tech sector should propel imports,” said Oren Klachkin, financial market economist at Nationwide.
“Export growth is likely to be relatively more subdued as the Iran stalemate weighs on overseas demand, though solid energy shipments will provide some offset.”
The goods trade gap narrowed 3.4 per cent, or $2.9 billion, to $82.4bn last month, the Commerce Department’s Census Bureau said.
Economists polled by Reuters had forecast the goods trade deficit would be $86.5bn.
Goods exports increased 4.0pc to $219.7bn. There was a 7.5pc jump in exports of capital goods. Consumer goods exports shot up 7.8pc, while exports of industrial supplies, which include petroleum, increased 2.1pc.
“The oil export windfall must have been offset by higher prices for other critical materials imported from Persian Gulf nations, such as fertilizer and aluminum,” said Carl Weinberg, chief economist at High Frequency Economics. “So as expected, the net outcome was a bit less than the energy price spike suggests.”
A strong increase in petroleum exports is expected in the months ahead because of the Middle East conflict. The US is a net oil exporter.
Exports of motor vehicles and parts fell in April, as did those of food, feeds and beverages.
Imports of goods rose 1.9pc to $302.1bn, driven by a 5.6pc jump in capital goods, likely tied to AI.
Imports of industrial supplies fell 1.9pc. There were also sizeable declines in imports of motor vehicles and consumer goods.
Economists expect the ongoing Iran war and a ruling earlier this year by the US Supreme Court striking down President Donald Trump’s sweeping tariffs to boost imports this year.
The trade deficit subtracted 1.25 percentage points from gross domestic product in the first quarter.
It has been a drag on GDP growth for two straight quarters. The economy grew at a 1.6pc annualised rate last quarter after expanding at a 0.5pc pace in the October-December period.
“We see a risk that imports rise significantly over the next few months, as companies capitalise on the cut to tariffs on many products following the Supreme Court’s February ruling and attempt to build precautionary inventories to protect themselves against supply chain disruptions linked to the war in the Middle East,” said Oliver Allen, senior US economist at Pantheon Macroeconomics.
Business inventories have been drawn down since the second quarter of 2025. Restocking would limit the anticipated hit to economic growth from imports.
The Census Bureau also reported on Friday that wholesale inventories increased 0.5pc in April after advancing by 1.5pc in March. Stocks at retailers rose 0.7pc, matching March’s gain. Inventories at motor vehicle and parts dealers increased 0.9pc after rising 1.1pc in the prior month.
Excluding motor vehicles and parts, retail inventories gained 0.6pc, matching the rise in March. This component goes into the calculation of GDP. Economists at Goldman Sachs left their second-quarter GDP growth estimate unchanged at a 2.0pc rate.
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