October Trade Deficit Drops to Lowest Level since Great Financial Crisis

The Trade Deficit is one of the two components of the ‘twin deficits’; the other being the federal budget deficit. The trade deficit used to be a number that received a ton of attention in the 1980s and 1990s because it was determined to be a strong gauge of the strength and weakness in the US economy. It was last positive in 1975, but big moves in the trade deficit through the 80s and 90s impacted the stock market.

Lately, not many people focus on the trade deficit numbers; however, it is still an excellent metric for identifying how the US is performing. How much more are we consuming than we are producing? It also allows us to export our inflation abroad. If the rest of the world decides to stop making things for us, then it could be an ugly transition.

Current Trends

The October trade deficit came in at -$29.3B. This is the smallest trade deficit since the 2009 Great Financial Crisis. The fall in the deficit is primarily driven by a collapse in Imports. This is driven by tariffs. Earlier in 2025, before tariffs went into effect, imports surged as people tried to dodge tariffs. That inventory buildup has resulted in less imports now. In addition, imports that were going to the US are now going to other countries where tariffs have not been implemented. Needless to say, foreigners are not paying the tariffs—US consumers are just getting less stuff.