US Trade Deficit Widens to $88.6 Billion in July as Imports Climb

The U.S. goods and services trade deficit widened to $88.6 billion in July, up $17.4 billion from a revised $71.2 billion in June, as exports fell across both goods and services while imports of capital goods climbed. The 24.4 percent monthly increase erased the improvement recorded in May and June. The move was almost entirely a goods story: the goods deficit increased $17.6 billion to $119.6 billion, while the services surplus increased $0.2 billion to $31.0 billion.

The Goods Account Absorbed the Entire Move

Separating the two halves of the trade account matters this month, because they moved in opposite directions and at very different magnitudes. The goods deficit took on $17.6 billion of additional deficit in a single month. The services surplus, the steadier of the two, improved by $0.2 billion to $31.0 billion — an offset small enough to leave the headline almost untouched.

Adjusting for prices sharpens the picture, and it points to exports rather than imports. Measured in 2017 dollars, the real goods deficit increased $12.0 billion, or 12.7 percent, to $106.4 billion, against a 17.7 percent increase in the nominal goods deficit. That divergence is concentrated on the export side: real goods exports decreased 1.8 percent while nominal goods exports fell 2.9 percent, meaning falling export prices did part of the damage to the headline. On the import side the two readings nearly coincide — real goods imports increased 3.8 percent against a 3.9 percent nominal increase — so the import build was a genuine increase in volume, not a price effect.

Exports Retreated Across Goods and Services

Total exports were $310.7 billion in July, $6.6 billion less than June and down 2.1 percent. Goods exports decreased $6.2 billion to $201.0 billion, a 3.0 percent monthly decline, and services exports decreased $0.4 billion to $109.7 billion, down 0.4 percent.

The goods decline was concentrated in industrial supplies, where two subcategories carried most of the drop.

• Industrial supplies and materials: decreased $8.7 billion
  • Crude oil: decreased $4.5 billion
  • Nonmonetary gold: decreased $3.9 billion
• Capital goods: increased $1.9 billion
• Consumer goods: increased $1.7 billion
  • Pharmaceutical preparations: increased $1.0 billion

The nonmonetary gold line deserves a caveat that the headline balance does not carry. When BEA incorporates this release into the national accounts, it replaces exports and imports of nonmonetary gold with an adjustment calculated as the difference between domestic production and industrial use of gold. The $3.9 billion swing in gold exports is therefore real for the trade balance as published, but it does not pass through to GDP at face value.

Services exports softened broadly, with gains in intellectual property charges failing to offset weaker travel.

• Travel: decreased $0.6 billion
• Financial services: decreased $0.3 billion
• Transport: decreased $0.2 billion
• Charges for the use of intellectual property: increased $0.4 billion
• Other business services: increased $0.2 billion

Imports Climbed on Computing Hardware

Total imports were $399.3 billion, $10.8 billion more than June and up 2.8 percent. Goods imports increased $11.4 billion to $320.6 billion, a 3.7 percent monthly gain, while services imports decreased $0.6 billion to $78.7 billion.

One category dominated. Capital goods imports increased $14.4 billion, exceeding the entire $12.0 billion increase in goods imports on a Census basis.

• Capital goods: increased $14.4 billion
  • Computers: increased $6.9 billion
  • Computer accessories: increased $6.6 billion
  • Semiconductors: increased $1.2 billion
• Industrial supplies and materials: decreased $1.8 billion
  • Crude oil: decreased $1.8 billion

Composition carries a different signal than the headline. Computers, computer accessories, and semiconductors are inputs to business investment, not household consumption. Imports subtract from GDP arithmetically, but the equipment behind this particular increase reappears on the investment side of the accounts. A deficit that widens on capital equipment is a materially different economic event from one that widens on consumer imports.

On the services side, imports declined on lower intellectual property charges, which fell $0.5 billion, and transport, down $0.3 billion, while travel imports increased $0.2 billion.

Revisions Narrowed the June Base

Exports and imports of goods and services were revised for January through June 2026 to incorporate more comprehensive quarterly and monthly source data. For June, exports of services were revised up $2.3 billion, exports of goods up $0.3 billion, imports of services up $0.3 billion, and imports of goods up $0.2 billion.

The $2.3 billion upward revision to June services exports is larger than the typical monthly trade revision, and it runs in the direction that matters for how July reads. A stronger June services export figure narrows the revised June deficit to $71.2 billion, which means part of the $17.4 billion month-over-month widening is measured against a better base than the one originally published.

Trading Partners: Mexico Widened, Canada Narrowed

Deficits in July were recorded with Mexico ($27.5 billion), Vietnam ($23.3 billion), Taiwan ($18.1 billion), China ($15.2 billion), and South Korea ($10.4 billion), among others, alongside surpluses with the Netherlands ($7.8 billion) and South and Central America ($6.6 billion). Three bilateral balances moved enough to warrant attention.

• Mexico: the deficit increased $7.2 billion to $27.5 billion, as exports decreased $0.2 billion to $32.6 billion and imports increased $7.0 billion to $60.1 billion
• Switzerland: the balance shifted from a $2.9 billion surplus in June to a $0.6 billion deficit, as exports decreased $2.0 billion to $4.4 billion and imports increased $1.5 billion to $5.0 billion
• Canada: the deficit decreased $3.7 billion to $3.2 billion, as exports increased $0.5 billion to $29.3 billion and imports decreased $3.3 billion to $32.5 billion

The Mexico deficit widened $7.2 billion in a month when the total deficit widened $17.4 billion, and that move came entirely from the import side.

The Year-to-Date Picture Remains Far Better Than 2025

The monthly print sits against a cumulative backdrop that still looks strong. Year-to-date, the goods and services deficit decreased $188.4 billion, or 29.6 percent, from the same period in 2025. Exports increased $237.2 billion, or 12.0 percent, while imports increased only $48.8 billion, or 1.9 percent — a wide gap between the two growth rates.

The three-month moving average, a cleaner read on direction than any single month, points the other way. The average goods and services deficit increased $11.9 billion to $78.5 billion for the three months ending in July, with average exports decreasing $6.4 billion to $316.0 billion and average imports increasing $5.5 billion to $394.5 billion. Year-over-year, the average deficit increased $11.7 billion, as average imports increased $45.2 billion against a $33.5 billion increase in average exports.

Those two framings are not in conflict. The year-to-date comparison is measured against an elevated 2025 base, while the three-month average captures the current run rate. On the current run rate, the deficit is widening.

Implications for Third-Quarter GDP

July is the first month of the third quarter, and net exports enter GDP directly. A $17.4 billion widening in the quarter's opening month puts net trade on course to subtract from third-quarter growth unless August and September reverse it. Two qualifiers temper that. The real goods deficit — the concept closer to what enters the national accounts — increased 12.7 percent against the 17.7 percent nominal increase, so the drag in volume terms is smaller than the headline implies. And the gold adjustment removes the $3.9 billion export decline in nonmonetary gold from the GDP calculation entirely.

The next release, covering August 2026, is scheduled for October 6. The decisive line is capital goods imports: a repeat of July's $14.4 billion increase would confirm an investment-led import cycle rather than a one-month pull-forward, and would keep the goods deficit near $119.6 billion even if exports stabilize. The offsetting number to watch is industrial supplies and materials on the export side, where a recovery of July's $8.7 billion decline is what a narrowing back toward the June balance would require.