The U.S. trade deficit widened sharply in May as an artificial intelligence investment boom helped to drive imports of capital goods to a record high, suggesting that trade remained a drag on gross domestic product in the second quarter.
Exports declined by -3.2%mom to USD317.7b in May-26, pulling back from April’s record high of USD328.2b. This contraction was primarily driven by an -USD11.3b drop in goods exports to USD210.6b, largely led by a -USD5.5b decline in industrial supplies and materials, with decreases in nonmonetary gold (-USD6.2b), other precious metals (-USD1.3b), and natural gas (-USD1.1b).
Conversely, US imports climbed by +3.3%mom to USD395.3b, the highest level since Mar-25, underpinned by +USD12.3b surge in goods imports to USD317.0b, where consumer goods rose by +USD3.5b on the back of higher inflows of pharmaceuticals alongside cell phones and household items.
Consequently, the US trade deficit widened sharply to -USD77.6b from a revised -USD54.6b in Apr-26, the largest deficit since Mar-25 but smaller than -USD78.5 predicted by the market consensus.
In a separate release, the ADP Research Institute reported that US private employers added an average of +21K jobs (expectation: +113k) per week in the four weeks ending 20th June, marking a slight decline from the previous period’s +24.25K weekly gain. This deceleration marks the second consecutive week of slowing job growth, aligning closely with ADP’s broader June print where private businesses added just 98K jobs (May-26: +122K).
Looking ahead, MBSB said North American trade policy uncertainty is poised to persist following the Trump administration’s formal decision not to renew the trilateral United States-Mexico-Canada Agreement (USMCA). Rather than extending the pact, the administration is shifting to a rolling cycle of annual trade reviews with Canada and Mexico as it pursues more stringent, alternative tariff measures. This marks a dramatic pivot from the treaty’s inception, when President Donald Trump lauded the accord as the single best trade agreement ever made. Tariff measures and trade negotiations uncertainty may continue to cloud trade performance. The sustained deficit also suggests continued drag from external trade to the US economic growth
