The US trade deficit in goods dropped hard in April, falling way more than anyone expected, after businesses stopped rushing in foreign goods ahead of delayed tariffs.
The Commerce Department said on Friday that the trade gap narrowed by 46%, landing at $87.6 billion. Imports collapsed to $276.1 billion, a drop of $68.4 billion in just one month. Meanwhile, exports saw a small bump, climbing by $6.3 billion to $188.5 billion.
The reason for March’s record-high numbers was the full-on panic to front-load goods before higher tariffs hit. Businesses were flooding warehouses with imports ahead of the deadlines. That rush pushed the trade deficit through the roof.
Now, with the tariff dates pushed back, that wave has pulled back—for now. But companies aren’t exactly relaxing. The schedule is still a mess.
Tariff delays drag out uncertainty
The White House moved most of the upcoming duties to July, while tariffs on Chinese products have been delayed until mid-August. That’s left companies stuck guessing. A bunch of economists say more import front-loading could still come since nobody knows what’s going to happen after the 90-day hold ends. Everyone’s walking on eggshells.
And then came the courts. On Wednesday, a US trade court slammed the brakes on most of President Donald Trump’s tariffs, saying he didn’t have the power to push them through the way he did. That decision was wiped the next day by a federal appeals court, which temporarily put the tariffs back in play.
So now the rules are changing every 24 hours, and businesses are caught in the middle of a legal tennis match. The economic impact has already landed. March’s record trade deficit played a big role in the 0.2% annualized drop in GDP for Q1. It’s simple math—when imports blow up and exports don’t keep up, growth slows.
New bill targets foreign money with tax penalties
While the tariff drama keeps spinning, Trump’s camp is pushing a new strategy to pressure foreign players—this time using taxes. The One Big Beautiful Bill Act, passed last week by the House of Representatives, includes massive changes to how foreign capital is treated in the US. But it still needs approval from the Senate.
Tucked inside that bill is Section 899, a provision that gives the US power to go after money from countries it sees as unfair. This means governments like France, which hit tech firms like Google, Apple, Facebook, and Amazon with a 3% tax on digital revenues, could face consequences. Germany, which is reportedly considering a 10% version, might be on the same list.
George Saravelos, global head of FX research at Deutsche Bank, said in a Thursday note that this would allow the US to turn a trade war into a capital war. Section 899 would let the government tax foreign holdings of US assets as a tool to get what it wants in economic talks.
George warned that this tactic “challenges the open nature of US capital markets” and would shrink returns on US Treasuries for international investors. He estimated the yield on Treasuries could fall by nearly 100 basis points, which would make them way less attractive. That’s a problem, since America depends on that investment to cover its twin deficit—both the trade and budget gaps.
Beat Wittmann, chairman at Porta Advisors in Switzerland, didn’t sugarcoat it. “It’s very bad,” he said. “This is huge — this is just one piece in the overall plan, and it’s completely consistent with what this administration is all about.”
Wittmann said that at the end of the day, it’s not about opinions. “The ultimate judge for this is not our opinions, it’s the bond market,” he added. And lately, he said, if investors are looking for safety, they’re leaning toward German bunds instead of Treasuries.
