The US trade deficit widened 42.2% to $77.6B in May, the highest level since March 2025, according to Commerce Department data released Tuesday.

Imports rose 3.3% to $395.3B, matching a 14-month high set during the original tariff-frontloading surge in early 2025.

Exports fell 3.2% to $317.7B, pressured by a strong dollar making US goods more expensive abroad.

AI buildout drives import surge

Capital goods imports hit a record $128B, lifted by semiconductors and computer accessories tied to data center construction.

Businesses are spending heavily on AI infrastructure, which relies heavily on imported components. Consumer goods imports rose $3.5B, driven by pharmaceuticals, cellphones, and household goods.

Motor vehicle imports rose $2.2B, and imports of industrial supplies climbed $3.1B. The goods trade deficit alone widened 28.4% to $106.5B.

Exports were not entirely weak. The US-Israel conflict with Iran boosted petroleum shipments, with crude oil exports rising $2B and total petroleum exports hitting a record $38.4B.

Services exports also set a record at $107.1B, aided in part by increased foreign tourist spending ahead of the FIFA World Cup.

Tariff uncertainty adds another layer

Beyond AI demand, some of May's import surge likely reflects businesses stocking up before the next round of trade restrictions. The Supreme Court earlier this year struck down the sweeping global tariffs Trump imposed under the International Emergency Economic Powers Act.

The administration has since issued a flat 10% duty on all trading partners as a stopgap, but that authority is expected to expire later this month.

To replace it, the Trump administration is preparing two Section 301 trade investigations that would likely restore tariff rates to pre-ruling levels. The US also recently declined to renew its trade agreement with Canada and Mexico, setting up an annual review process instead.

The Atlanta Fed's GDPNow model currently forecasts second-quarter GDP growth at a 1.2% annualized rate, down from 2.1% in the first quarter. Net exports had already subtracted 0.37 percentage points from first-quarter growth.

Goods trade deficits with Mexico and Vietnam each widened to a record in May. The gaps with Canada and China also expanded, despite existing tariffs on those trading partners. The average monthly goods deficit since Trump's second term began is $96B, roughly 5% below the pace in the 16 months before he took office.

With new tariff authority expiring and North American trade uncertainty growing, import volatility is unlikely to settle anytime soon.