US October trade deficit fell to a 16-year low amid Trump’s tariffs 

Data released by the US Commerce Department today showed that the country’s trade deficit in October 2025 narrowed to its lowest level since 2009. The gap shrank to $29.4 billion, a staggering 39% decrease from the previous month.

The US trade deficit plummeted in October 2025 to levels not seen since the Great Recession, driven by a sharp contraction in imports as businesses navigated a landscape of aggressive tariffs and shifting global supply chains. According to the Commerce Department data, the goods and services deficit fell to $29.4 billion, far surpassing economists’ estimates of a $58.7 billion shortfall.

Key drivers of the fall in the US trade deficit

The dramatic narrowing of the deficit was fueled by two primary factors: a significant pullback in inbound shipments and a record-breaking surge in exports.

• Imports Drop: Total imports decreased 3.2% to $331.4 billion. The most notable decline was in pharmaceutical preparations, which hit their lowest levels since mid-2022. Analysts suggest companies had previously “front-loaded” or stockpiled medication earlier in the year to avoid looming tariffs, leading to a natural cooling in October.
• Export Record: U.S. exports rose 2.6% to a record $302 billion. This was largely boosted by a “gold rush” effect; non-monetary gold exports surged as international dealers moved precious metals back to overseas storage after the administration temporarily backed off certain tariff threats.

The “Trump Effect” and market volatility

The report, which was delayed for over a month due to a 43-day federal government shutdown, highlights the turbulence of 2025. Throughout the year, President Trump utilized the International Emergency Economic Powers Act (IEEPA) to impose reciprocal tariffs, which reached an effective rate of nearly 17% by November, the highest since 1935.

While the October data show a win for the administration’s goal of a smaller trade gap, economists warn that the figures are highly volatile. Earlier in the year, the deficit actually hit monthly records as businesses scrambled to import goods before new taxes took effect.

Meanwhile, a narrowing of the deficit “will provide a much-needed boost for fourth quarter economic growth that has been hit hard by the Federal government shutdown,” said Chris Rupkey, chief economist at Fwdbonds.

He added, “The U.S. appears to be winning the trade war with tariffs curbing the imports of foreign goods, but America’s trading partners are not holding any grudge as they continue to buy more American goods and services.”

According to Rupkey, “So far the forecasts for a U.S. recession are coming up dry as productivity continues to backstop growth.”

China’s exports to the US have fallen after the tariffs

Notably, the tariffs have fundamentally reshaped America’s trading partnerships. For instance, once the top source of US imports, trade with China has tanked by nearly 25% year-to-date. Notably, while the President rolled back some of the tariffs on China, the country is still subject to a 47.5% tariff. Only India is subject to a higher tariff as the administration pushes the world’s most populous country to cut oil imports from Russia and has accused it of fueling the country’s war in Ukraine.

Meanwhile, imports from Mexico, Vietnam, and Taiwan have increased as companies attempt to circumvent the high duties imposed on Chinese goods. Additionally, although the overall deficit narrowed, deficits with Canada and Mexico continued to be a point of friction ahead of the 2026 USMCA renegotiations.

The year-to-date deficit is still higher than the last year

Despite the October milestone, the year-to-date trade deficit for 2025 remains approximately 8% higher than in 2024. Whether this 16-year low represents a permanent structural shift or a temporary reaction to policy uncertainty remains a subject of intense debate on Wall Street and in Washington.

Notably, President Trump has touted the tariffs as a way to reduce the country’s budget deficit, which has soared in recent years on higher government spending. He also talked about sending out $2,000 tariff dividend checks to Americans. However, while the President has repeatedly promoted the idea on social media, even suggesting as recently as Christmas 2025 that 2026 would be the “largest tax refund season of all time,” these cheques are yet to be sent out.

Trump talked about sending $2,000 tariff dividend checks

Economists and budget experts have pointed out a major gap between the tariff revenue and the cost of the checks. A $2,000 payment for all low- and middle-income Americans (roughly 150 million adults) would cost approximately $300 billion. If children are included, that cost jumps to nearly $600 billion. However, in the 2025 fiscal year, tariffs brought in about $195 billion, far short of what is needed to fund a $2,000 per person payout.

There are also conflicting discussions on how the administration intends to use the tariff money, as it has talked about using the tariff money to pay down the $38 trillion national debt and offset the “One Big Beautiful Bill Act” (OBBBA) tax cuts, meaning the same dollar is being promised to multiple different goals.

Moreover, the President cannot unilaterally send out checks. Any direct stimulus or “dividend” requires an act of Congress. While some Republicans (like Senator Josh Hawley) have proposed smaller rebate bills, no legislation for a $2,000 check has passed.

Tariffs are facing legal scrutiny

Finally, the legality of the tariffs themselves is currently before the U.S. Supreme Court (in cases like Learning Resources v. Trump). If the Court rules that the President overstepped his authority in imposing these tariffs, the government might actually have to refund the money to importers rather than sending it to citizens.

Recently, Treasury Secretary Scott Bessent and other officials have suggested that the “dividend” might not be a physical check in the mail. Instead, they have hinted that the benefit could be “rebranded” to include:

• Existing Tax Cuts: Claiming the “dividend” is actually the savings people see from the 2025 tax cuts.
• Targeted Exemptions: Policies like “no tax on tips” or “no tax on Social Security.”

All said, economists are still divided on the benefits of tariffs as many argue that they would mostly be borne by American consumers rather than foreign companies.