Trade deficit surges despite tariffs, per U.S. Commerce Dept.

New data released by the U.S. Department of Commerce on Thursday showed a widening trade deficit despite the implementation of tariffs in July, leading to criticism by experts and reassurances by politicians.

A cargo ship, Flyboy008/Deviant Art 25.

Based on the data release, in the month of July 2025, the U.S. trade deficit rose 32.5% to $78.3 billion. Import growth was a major driver of this change, up 5.9% to a staggering $358.8 billion, while the total export value rose just 0.3% to $280.5 billion.

Specifically, within goods, imports rose 6.9%, levied by a $12.5 billion rise in industrial supplies like nonmonetary imported precious metals like gold, and aa record high of $96.2 billion in capital goods imports. Similarly, the goods-only deficit rose to approximately $103.9 billion, a substantial widening compared to previous months.

Services imports hit a record $75.5 billion in July, and exports too also hit a record high, $101.0 billion. However, travel services did slip marginally due to immigration policy constraints faced by higher sentiments of worry by foreigners wanting to visit the United States.

According to the Atlanta Fed, this rise in the trade deficit may lead to a decline in Q3 GDP growth, with their estimate showing a 3% gain, down from the 3.3% projected in Q2.

The International Monetary Fund used this data to challenge the Trump administration's justification for implementing tariffs as a tool to reduce the long-standing trade deficit. "Tariffs… harm global demand, raise inflation and do little to correct imbalances… The U.S. must reduce fiscal deficits," the IMF stated in its July 2025 External Sector Report. The report also cautioned that trade imbalances could not be remedied effectively by levying tariffs on imports.

Additionally, earlier in the year, Maurice Obstfeld from the Peterson Institute predicted this outcome at his speech in the Brookings Papers on Economic Activity last Spring, arguing that, "There is a lot of political rhetoric about the trade balance… My message is that the reality is more nuanced... Tariffs will generate some revenue, but not enough to plug the hole."

Meanwhile, other countries are using the tariff void left by Trump's United States to increase their own imports, replacing American dominance in specific fields. Canada's trade deficit fell significantly in July, fueled by rising vehicle and energy exports, two fields hit hard by Trump's tariff policies.