U.S. Trade Deficit Falls to Lowest Level Since 2009 as Tariffs Reshape Flows

The U.S. trade deficit narrowed sharply in October, falling to its lowest level since the aftermath of the global financial crisis, as exports rose and imports declined following President Donald Trump’s tariff actions.

The Commerce Department reported Thursday that the trade gap shrank to $29.4 billion in October, a 39% decline from the prior month. Exports increased 2.6%, while imports fell 3.2%, reflecting a meaningful slowdown in inbound trade alongside steady foreign demand for U.S. goods and services.

It marked the smallest trade deficit since the second quarter of 2009, when the U.S. economy was emerging from the Great Recession.

The data captures trade activity roughly six months after Donald Trump introduced sweeping “liberation day” tariffs in April 2025. At the time, economists warned the measures could provoke retaliation and disrupt global supply chains. While the administration later walked back some of the most aggressive threats, the latest figures suggest tariffs have curbed imports without materially dampening demand for U.S. exports.

Even so, the cumulative picture remains mixed. On a year-to-date basis, the trade deficit is still 7.7% higher than the same period in 2024, underscoring that October’s improvement does not fully offset earlier imbalances.

Still, economists say the recent narrowing could provide a timely lift to growth. Chris Rupkey, chief economist at FWDBONDS, said the shrinking deficit should “provide a much-needed boost for fourth-quarter economic growth,” which has been weighed down by the federal government shutdown.

“The U.S. appears to be winning the trade war, with tariffs curbing imports of foreign goods while trading partners continue to buy more American products,” Rupkey said, adding that productivity gains are helping blunt recession risks.

Separate data released Thursday reinforced that view. According to the Bureau of Labor Statistics, third-quarter productivity surged at a 4.9% annual rate, helping drive unit labor costs down 1.9%, far more than economists expected. The decline suggests businesses are expanding output without fueling inflationary wage pressure.

Matthew Martin, senior economist at Oxford Economics, said the figures point to a potential “jobless expansion,” where efficiency gains — aided by tax cuts, deregulation, and technological advances such as AI — allow growth to continue without overheating.

Labor market data also remained stable. Initial jobless claims for the week ending January 3 totaled 208,000, pushing the four-week moving average to its lowest level since April 2024, according to the Labor Department.

Taken together, the data suggests tariffs are reshaping trade flows while productivity gains are helping stabilize growth — a combination that could prove pivotal as the economy heads into 2026.

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