The U.S. trade deficit narrowed from $904 billion in 2024 to about $901 billion last year, still the third-highest deficit on record, the Commerce Department reported.

While the overall U.S. trade deficit shrunk slightly last year, the gap in the trade in goods hit a record high.Joe Raedle / Getty Images

The U.S. trade deficit slipped modestly in 2025, a year in which President Donald Trump upended global commerce by slapping double digit tariffs on imports from most countries. But the gap in the trade of goods such as machinery and aircraft - the main focus of Trump`s protectionist policies - hit a record last year despite sweeping import taxes.

Overall, the gap the between the goods and services the U.S. sells other countries and what it buys from them narrowed to just over $901 billion, from $904 billion in 2024, but it was still the third-highest on record, the Commerce Department reported Thursday.

Exports rose 6% last year, and imports rose nearly 5%.

And the U.S. deficit in the trade of goods widened 2% to a record $1.24 trillion last year as American companies boosted imports of computer chips and other tech goods from Taiwan to support massive investments in artificial intelligence.

Amid continuing tensions with Bejing, the deficit in the goods trade with China plunged nearly 32% to $202 billion in 2025 on a sharp drop in both exports to and imports from the world`s second-biggest economy. But trade was diverted away from China. The goods gap with Taiwan doubled to $147 billion and shot up 44%, to $178 billion, with Vietnam.

Economist Chad Bown, senior fellow at the Peterson Institute for International Economics, said the widening gaps with Taiwan and Vietnam might put a "bulls eye`` on them this year if Trump focuses more on the lopsided trade numbers and less on the U.S. rivalry with China.

In 2025, U.S. goods imports from Mexico outpaced exports by nearly $197 billion, up from a 2024 gap of $172 billion. But the goods deficit with Canada shrank by 26% to $46 billion. The United States this year is negotiating a renewal of a pact Trump reached with those two countries in his first term.

The U.S. ran a bigger surplus in the trade of services such as banking and tourism last year - $339 billion, up from $312 billion in 2024.

The trade gap surged from January-March as U.S. companies tried to import foreign goods ahead of Trump`s taxes, then narrowed most of the rest of the year.

Trump`s tariffs are a tax paid by U.S. importers and often passed along to their customers as higher prices. But they haven`t had as much impact on inflation as economists originally expected. Trump argues that the tariffs will protect U.S. industries, bringing manufacturing back to America and raise money for the U.S. Treasury.