US Trade Deficit Jumps to 14-Month High as AI Spending Lifts Imports

The US trade deficit jumped to $77.6 billion in May, a 14-month high that put the goods-and-services gap 42.2% above April’s revised level. The increase, driven by imports rather than exports, hands the Trump administration an awkward data point on the same week it celebrated Toyota’s $3.6 billion move to bring Tacoma production from Mexico to Texas.

Imports climbed 3.3% to $395.3 billion, also a 14-month high, while exports fell 3.2% to $317.7 billion, according to the report released Tuesday by the US Census Bureau and the Bureau of Economic Analysis. Economists polled by Reuters had forecast a $78.5 billion gap.

The May Deficit, in Numbers

The $23.0 billion month-on-month swing came almost entirely from the goods side. The goods deficit widened $23.6 billion to $106.5 billion, also the highest since March 2025; the services surplus ticked up $0.6 billion to $28.9 billion. Goods imports jumped 4.0% to $317.0 billion, the loftiest level since April 2025, when shippers raced to land cargo before a round of tariffs took effect.

Exports dropped $10.5 billion. Goods exports alone fell $11.3 billion to $210.6 billion, pulled down by a $3.5 billion drop in capital goods shipments. Consumer goods exports fell $2.1 billion and industrial supplies and materials dropped $5.5 billion, with nonmonetary gold accounting for $6.2 billion of that decline. Petroleum exports bucked the trend, climbing to a record $38.4 billion.

The strong dollar has made US-made goods more expensive abroad. The Atlanta Federal Reserve’s GDPNow model currently forecasts 1.4% annualized growth in the second quarter, with trade now subtracting from output for two straight quarters.

AI Capital Goods Are Doing the Lifting

Capital goods imports, the bucket that covers the servers, networking gear and chips behind the AI buildout, climbed $1.1 billion to a record $128.0 billion in May. Semiconductors added $1.0 billion. Computer accessories added $1.2 billion. Only finished computers moved the other way, falling $3.4 billion. Nationwide financial market economist Oren Klachkin framed the surge as a demand story.

Imports convey solid U.S. domestic demand, though inventory frontloading likely lent a hand. AI investment appears to remain on a very solid track.

The capital-goods line is doing more than its share of the work. Even with computers down, the $128.0 billion record lifts capital goods above every other import category. Citigroup economist Veronica Clark cautioned that the AI-related portion may already be losing some momentum: “And while AI investment is likely to remain strong, imports of computers and related equipment have slowed in second-quarter data so far, suggesting potentially less of a boost to GDP growth from AI-related components compared to recent quarters.”

Real, inflation-adjusted capital goods imports actually fell, from $110.5 billion in April to $108.7 billion in May, a sign that higher prices explain part of the nominal record. The real goods deficit still rose $15.8 billion, or 18.7%, to $100.0 billion, a softer climb than the 28.8% nominal jump. The mix of AI-related import drivers in May included:

• Semiconductors: imports up $1.0 billion
• Computer accessories: imports up $1.2 billion
• Capital goods, total: imports up $1.1 billion to a record $128.0 billion
• Computers (finished): imports down $3.4 billion

Where the Imports Came From

The country mix in May tells a different story from the headline. The biggest US deficits were with Vietnam ($20.6 billion), Mexico ($20.1 billion), Taiwan ($19.4 billion), China ($14.5 billion) and the European Union ($9.3 billion). Canada, the country Trump has pressed hardest in trade talks, ran a $7.0 billion deficit in May.

The list of US surpluses is shorter and more concentrated. The Netherlands ($9.1 billion), Hong Kong ($5.6 billion), South and Central America ($4.8 billion), Australia ($1.9 billion) and the United Kingdom ($1.4 billion) all took more US goods than they sent.

Mexico’s gap with the US widened by $5.3 billion in May, with US imports from Mexico rising $3.9 billion to $53.5 billion and US exports falling $1.5 billion to $33.4 billion. The expansion comes as the Trump administration has refused to extend the US-Mexico-Canada Agreement on its current terms and is conducting annual reviews instead.

Tariffs and the Toyota Win

President Donald Trump seized on a piece of good news in an otherwise difficult report. On Monday, Toyota announced it would spend $3.6 billion to move Tacoma production from its Baja California plant to San Antonio by 2030. The investment is expected to create 2,000 jobs and roughly double the size of the 2.7-million-square-foot facility.

Toyota is moving from Mexico to the United States (Texas!). A really big deal. Tariffs at work!

The import data shows why Trump reached for the Toyota deal. Motor vehicle, parts and engine imports climbed $2.2 billion in May, with passenger cars alone up $1.0 billion. The auto bill is rising even as Toyota shifts one truck line back to Texas. The wider category, which includes parts shipped from Japan, Germany and South Korea, has not yet responded to the on-shoring announcement.

Toyota’s total San Antonio investment now stands at $8.3 billion since the plant broke ground in 2003, and the company has committed up to $10 billion more in US investment through 2030. Ted Ogawa, CEO of Toyota Motor North America, said the expansion “is a testament to our confidence in the region’s workforce, innovation and long-term growth potential.”

Trade Is Subtracting From Growth

The widening goods gap has now pulled down GDP for two consecutive quarters. Brean Capital chief economic advisor John Ryding estimated that the May trade data alone points to a 1.7 percentage point drag on second-quarter real GDP growth. The Atlanta Fed’s tracking model has growth at 1.4% annualized, well below the 2.1% pace of the first quarter.

The 14-month high in imports is a mixed signal. Stronger imports can reflect inventory rebuilding ahead of new tariffs, an effort by companies to avoid shortages tied to the Iran war and rising domestic demand. All three appear to be in play. Crude oil imports rose $1.5 billion as shippers raced to lock in supply ahead of any Middle East disruption. Reuters’ full write-up of the capital goods breakdown lays out the competing drivers.

Consumer goods imports added $3.5 billion, driven by pharmaceutical preparations ($1.9 billion) and cell phones and other household goods ($1.0 billion). That mix points to stronger household spending ahead, separate from the business-investment story.

The Year-to-Date Picture Is Quieter

The single-month surge looks different when placed against the year so far. Through the first five months of 2026, the goods-and-services deficit has fallen $203.9 billion, or 40.6%, from the same stretch in 2025. Exports are up $164.7 billion, or 11.7%, and imports are down $39.2 billion, or 2.1%.

The three-month moving averages smooth the volatility. The average goods-and-services deficit for the three months ending in May was $62.9 billion, up $7.5 billion from the prior three-month average. Average exports reached $321.5 billion and average imports $384.5 billion.

May also fits a longer-running pattern flagged by Fitch Ratings, which noted in May that AI-related capital goods have kept US imports elevated even as tariffs dragged on consumer goods, autos and industrial materials. The mix is shifting; the headline total is bouncing around a higher base. May 2026 trade at a glance:

• $77.6 billion – goods-and-services deficit (14-month high)
• $395.3 billion – total imports, up 3.3% from April
• $317.7 billion – total exports, down 3.2% from April
• $128.0 billion – capital goods imports (record)
• 40.6% – year-to-date deficit decline vs same period 2025

Frequently Asked Questions

Why did the US trade deficit jump so much in May 2026?

The $23.0 billion month-on-month increase came from rising imports, which hit a 14-month high of $395.3 billion, while exports fell to $317.7 billion. Capital goods imports, semiconductors and auto parts led the import side, and the strong dollar pulled down exports of goods by 5.1%.

Have tariffs reduced the US trade deficit?

Not on a monthly basis. The deficit jumped 42.2% to $77.6 billion in May, and the goods deficit with Mexico alone widened $5.3 billion. Year-to-date, the deficit is down 40.6% from the same period in 2025, but the May surge shows tariffs have not insulated the goods side from a $106.5 billion monthly imbalance.

What are capital goods imports and why do they matter?

Capital goods are the long-lived equipment businesses buy: servers, machine tools, aircraft parts, generators. In May, capital goods imports hit a record $128.0 billion, driven by AI-related categories like semiconductors and computer accessories. They are the single largest import line and the most exposed to the AI investment cycle.

When will the next US trade report be released?

The Census Bureau and BEA scheduled the next release, covering June 2026, for Tuesday, August 4, 2026.

How does the May 2026 deficit compare with the same month last year?

The May deficit is the highest since March 2025. Year-over-year, the three-month moving average deficit is down $23.8 billion, exports are up $36.1 billion and imports are up $12.4 billion, a mixed picture of a higher monthly peak set against a softer trend.