The numbers: As companies rushed to buy foreign goods before additional tariffs were imposed, the U.S. trade deficit in goods skyrocketed to a record high in January.
The Commerce Department’s preliminary assessment, which was made public on Friday, showed that the trade gap had grown by 25.6% to a record $153.3 billion.
Next week, President Trump plans to increase China tariffs by an additional 10 percentage points. He has threatened to impose significant additional tariffs on China, Mexico, and other trading partners, and he has showed no signs of backing down.
Important information: In January, goods imports increased 11.9% to $325.4 billion. Gains were seen in all major categories, but imports of industrial goods accounted for a sizable portion.
In December, U.S. exports increased by 2% to $172.2 billion. Shipments have been impacted by a sluggish global economy and a strong currency, which raises the cost of American goods.
In January, wholesale inventories increased by 0.7%, according to the data.
Retail advanced inventory decreased by 0.1%. Retail inventories were up 0.4% excluding vehicles.
Big picture: “The President’s tariff threats show no sign of fading, so a further surge in imports – as consumers and businesses try to get ahead of higher prices – is in the cards in the months ahead,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.
With only one month’s worth of data, it is difficult to predict, but the trade sector appears to be a drag on headline GDP growth in the first quarter.
Market reaction: While the 10-year Treasury yield, BX:TMUBMUSD10Y, dropped to 4.252% in early morning trade, stocks, including the SPX DJIA, were expected to open higher on Friday.
