The recent whipsaw in trade policies have significantly altered the flow of goods and services to and from the United States in April.
The total trade deficit plunged to its lowest level since 2023—just a month after it spiked to a record high.
Imports from China—the primary target of the current trade tensions—plunged in April to their lowest level since 2010, excluding the first two months of the pandemic in 2020. That puts U.S. imports from China at levels typically seen during recessions.
A sharp drop in imports from the European Union also contributed to the decline in the trade deficit. Still, EU import levels remained relatively normal, as trade negotiations with Europe have progressed more smoothly.
The improvement in the trade balance should help lift GDP growth in the second quarter—reversing the dynamic from the first quarter, when trade was a major drag on overall growth.
But the downside is clear: If imports stay this low through the summer, inventories may not be sufficient to keep prices in check.
As the economy heads toward the back-to-school and holiday shopping seasons, Americans could face fewer goods and limited variety on store shelves—a difficult scenario taking shape just as consumption is expected to pick up.
Read more of RSM’s insights on the economy and the middle market.
