U.S. Trade Deficit Declines Significantly in October
The U.S. trade deficit decreased to its lowest level since mid-2009, according to a Commerce Department report released on Thursday. For October, the trade shortfall was recorded at $29.4 billion, marking a 39% reduction from the previous month.
During October, exports saw an increase of 2.6%, while imports experienced a 3.2% decline. This total represents the lowest trade deficit figure since the second quarter of 2009, a period following the financial crisis and the Great Recession.
These figures reflect trade activity six months after the implementation of tariffs in April 2025. Economists and policymakers had previously expressed concerns that such levies could lead to retaliatory measures and impact global trade flow.
Year-to-Date Comparison and Economic Commentary
Despite the October reduction, the year-to-date deficit remained 7.7% higher compared to the same period in 2024.
Chris Rupkey, chief economist at Fwdbonds, stated that the decelerating trade imbalance is expected to provide a boost for fourth-quarter economic growth, which has been affected by a federal government shutdown. He further commented that tariffs appear to be curbing foreign imports while trading partners continue to purchase American goods and services, and that productivity is supporting growth against recession forecasts.
Matthew Martin, senior economist at Oxford Economics, noted that the latest figures suggest firms are increasing output with less labor, supporting a concept of a jobless expansion. He emphasized the role of productivity in determining economic growth rates and inflationary dynamics, suggesting that continued acceleration in productivity due to factors like tax cuts, deregulation, and technological advancements could facilitate economic growth without generating inflation.
Productivity and Labor Market Data
In a separate report released Thursday by the Bureau of Labor Statistics, third-quarter productivity increased at a rate of 4.9%. This rise in productivity contributed to a 1.9% decrease in unit labor costs for the period, exceeding expectations.
The Labor Department also reported that layoffs remain low despite weak hiring. Initial unemployment claims for the week ending January 3 totaled 208,000. This pushed the four-week moving average to its lowest point since April 27, 2024.