US DATA: US-China Goods Deficit At Smallest Since At Least 2009

There weren’t any major surprises in the final goods & services trade data for June as last week’s surprisingly small goods deficit in the advance report had already set the tone. US trade deficits with both the EU and China narrowed further, with the goods deficit to China of 0.6% GDP in Q2 the lowest quarterly deficit since at least 2009. 

• The goods & services trade deficit was close to expectations in June at $60.2bn (cons $61bn) after a near unrevised $71.7bn (initial $71.5bn) in May, after last week’s advance release just for goods had suggested similar.
• The goods & services deficit was equivalent to 2.5% GDP in Q2 after 5.2% GDP in Q1. That’s vs 3.4% GDP in Q4 or 3.1% GDP across 2024. Swings have come entirely from the goods deficit whilst the services surplus has been steady around 1.0% GDP.
• These low recent deficits are payback from the huge deficits of Dec and Q1 driven by tariff front-running, primarily gold and then pharmaceutical products.
• The goods deficit with the EU has narrowed to 0.7% of US GDP in Q2 vs 1.4% GDP in Q1 and 0.8% GDP in Q4, whereas the goods deficit with China has narrowed to 0.6% GDP in Q2 vs 1.1% GDP in Q1 and 1.0% GDP in Q4.
• Today’s details also show that June’s latest moderation in deficits, a surprise at the time of the advance release, was indeed driven by pharmaceutical imports (-36% M/M). At $17.1bn in June, pharma imports fell from $26.7bn in May as they continued to retrace from a huge peak of $50.2bn in March, having averaged $20.5bn in 2024 for context.
• Ireland has contributed heavily to these pharma flows (all imports from Ireland halved in June to $6.7bn) but imports from EU ex Ireland also eased from $42.7bn to $38.7bn (second lowest since mid-2022 for a nominal measure). This is down from $42.9bn in December.
• Imports from China saw a smaller decline on the month but have seen a more pronounced trend decline under the second Trump administration, most recently at $19.4bn in June after $20.9bn in May and $37.3bn in December.
• Exports have increased strongly over that period to the EU but less so for China. Exports to the EU increased to $35.8bn in June from $33.5bn in May and $30bn in Dec, whilst exports to China increased to $10.1bn from a particularly low $6.9bn in May (as trade flows slowed significantly in lagged response to policies that essentially halted trade between the two countries) and $11.5bn in Dec.