U.S. trade deficit increases in August as consumer spending, AI build out boost imports

The U.S. trade deficit widened more than expected in August, driven by a surge in imports of goods amid robust domestic demand, keeping trade on track to again subtract from economic growth in the third quarter.

The trade shortfall increased 13.7 per cent to US$105.6-billion, the Commerce Department’s Bureau of Economic Analysis and Census Bureau said on Tuesday. Economists polled by Reuters had forecast the deficit would be US$102.0-billion.

The deterioration was flagged by data last week that showed an import-driven surge in the goods trade deficit in August.

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Domestic demand increased at its fastest pace in more than 3-1/2 years in the second quarter, reflecting robust consumer spending and business spending on equipment, mostly related to AI. The trend appears to have spilled over into the third quarter, with data last month showing strong consumer spending in August as well as orders and shipments of nondefense capital goods, excluding aircraft.

But businesses are relying on imports to meet demand. The increase in imports also has occurred despite President Donald Trump’s aggressive tariffs, which he has argued are meant to shrink the trade deficit.

Imports increased 4.3 per cent to US$420.8-billion in August. Goods imports jumped 5.3 per cent to US$342.2-billion. Exports rose 1.4 per cent to US$315.2-billion. Goods exports increased 2.2 per cent to US$205.7-billion.

Trade has subtracted from gross domestic product for three straight quarters, and economists estimate it could cut as much as 2.5 percentage points from GDP in the third quarter.

Growth estimates for the July-September quarter are mostly above a 3.0-per-cent annualized rate, with consumer spending expected to offset the drag from imports. The economy grew at a 2.2-per-cent pace in the second quarter.