Tariff hoarding trend recedes! U.S. merchandise imports plummeted in June, narrowing the trade deficit more than expected, which may boost second-quarter GDP.

In June, the reduction of the U.S. goods trade deficit exceeded expectations, reflecting a weakening trend of pre-tariff purchases as the Trump administration's tariff policy took effect, resulting in a general decline in imports. Data released by the U.S. Department of Commerce on Tuesday showed that the unadjusted goods trade deficit narrowed by 10.8% from the previous month to $86 billion, a number lower than all economist forecasts. Specifically, in June, imports decreased by 4.2% to $264.2 billion, with imports of consumer goods reaching their lowest levels since September 2020, industrial goods imports hitting a new low since 2021, and a decline in automobile imports. Meanwhile, U.S. goods exports decreased by 0.6% during the same period. These data will provide a basis for economists to adjust their estimates of the net exports contribution to second-quarter GDP growth. The trade imbalance that weighed down GDP growth at the beginning of the year is expected to see significant improvement in the second quarter. In the first quarter of this year, U.S. businesses significantly increased imports ahead of the implementation of the Trump administration's tariff policy, resulting in a 4.61 percentage point decrease in the share of net exports in GDP, directly leading to a 0.5% annualized contraction in the economy. Prior to the release of the latest trade data, the Atlanta Fed's GDPNow model predicted a 2.4% growth in the U.S. economy from April to June, with net exports expected to contribute 3.31 percentage points. In addition to the goods trade data, the latest economic indicators estimate report shows that retail inventories grew by 0.3% in June, marking the largest increase since September of last year, largely driven by a surge in inventories at car dealerships; wholesale inventories increased by 0.2%. The frequent adjustments in tariff policy by the Trump administration continue to bring uncertainty to the manufacturing industry. While some trading partners have reached agreements, some countries still need to reach consensus with the U.S. before the Friday deadline to avoid the risk of significant tariff increases. The Trump administration views tariffs as a core strategy to stimulate domestic production, boost export growth, reduce trade deficits, increase revenue, and strengthen national security. It is worth mentioning that more complete June trade data (including the services account balance) will be officially released on August 5th.