Trade engine "shuts down"! US merchandise trade deficit expanded by 11.1% in May, far exceeding expectations.

In May, the unexpected expansion of the US goods trade deficit was due to the largest decrease in exports since the outbreak of the pandemic, while imports remained almost unchanged. Data released by the US Commerce Department on Thursday showed that the goods trade deficit widened by 11.1% to $96.6 billion. This number exceeded market expectations of $86.1 billion. In May, US goods exports fell by 5.2% to $179.2 billion, reflecting a sharp decline in exports of industrial goods such as crude oil. These data are not adjusted for inflation. Imports remained almost unchanged at $275.8 billion, after experiencing the largest decline on record a month ago. In the first quarter, due to US companies stockpiling goods and materials before President Trump imposed tariffs, imports surged. The widening deficit in May indicates that trade may contribute less to second-quarter economic growth than previously expected. Prior to the release of the latest data, the Atlanta Fed's GDPNow model predicted that net exports would contribute over 2 percentage points to second-quarter US Gross Domestic Product (GDP). According to revised data released on Thursday, the surge in imports in the first quarter caused a 4.66 percentage point reduction in the US government's GDP calculation, the largest decrease since 2020. The economy shrank by 0.5% from January to March. Trump has used tariffs as a strategic cornerstone to stimulate domestic production, boost exports, reduce trade deficits with US trading partners, increase government revenues, and enhance national security. Another report released by the US Commerce Department on Thursday showed that core capital goods orders for US factories increased by 1.7%, the largest increase since the beginning of the year. Shipments of core capital goods increased by 0.5%. Orders for durable goods (items with a lifespan of at least three years) increased by 16.4%. This was the largest increase since 2014, reflecting a significant increase in commercial aircraft orders. Boeing reported receiving orders for 303 aircraft in May, a significant increase from the previous month. Another report released by the US Department of Labor on Thursday showed that the number of continued claims for unemployment benefits continued to climb, reaching a new high since November 2021, indicating that unemployed Americans are finding it increasingly difficult to find new jobs.