A year and a half into the U.S. trade war, the level of exports and imports suggests a weariness on the part of trading partners that is only adding to U.S. trade deficits.
It is clear that the current strategy to rebalance global trade in favor of Washington has failed. The overall deficit has widened and the trade taxes imposed on U.S. companies are being passed along to customers, resulting in higher inflation.
Imports are once more surging as exports have been falling since April’s peak.
Get Joe Brusuelas’s Market Minute commentary every morning. Subscribe now.
Trade data for August, to be released on Tuesday, is expected to show another blowout, with the trade deficit topping $100 billion for the first time since the 2025 pre-tariff surge.
That would be a drag on gross domestic product that we nevertheless expect to come in at a 3.5% quarterly annualized growth rate in the third quarter.
Ever since the trade war began with the announcement of sweeping tariffs in April 2025, our trading partners have been looking for alternatives to the U.S., expanding their client base while the U.S. continues to look inward.
U.S. agriculture is one example. The damage of tariffs to farmers has resulted in a significant downturn in the rural-based economy. And if diesel exports are banned in an attempt to drive down prices, as has been proposed, the policy will only backfire, resulting in higher prices after a temporary reprieve.
Because of this new approach on trade, the U.S. is no longer the automatic global purchaser of last resort. The large trading economies have simply moved on to find other more reliable trade partners.
Consider Canada. As Prime Minister Mark Carney said in a recent interview with The New York Times and elsewhere, Canada is actively looking to extend its free-trade zone to the integrated states of the European Union and to join the EU as a security partner.
The U.S. trade war, he said, is having a real-world impact, just as it did in 2018, during a previous round of trade tensions.
While non-U.S. exports of Canadian goods have surged, the U.S. share of Canadian exports has dropped from 75% to 62% since April 2025.
Carney is no stranger to protectionist trade and economic policies. He was governor of the Bank of England during and after the Brexit vote, and he saw its impact on the UK’s economy. Now, as prime minister of Canada, he is looking to diversify his nation’s trade and strategic partnerships, particularly with Europe.
As with Brexit, there are reasons to be concerned about the U.S. withdrawal from the world economy.
Manufacturing jobs in both the U.S. and Canada would be at risk should trade ties between the U.S. and Canada continue to fracture.
Carney points out that the average U.S. content of a Canadian-produced vehicle is 50%. At the same time, Canada is far and away the biggest export market for U.S. cars.
In agriculture, Canada supplies 70% of potash that is essential for American farmers.
Should those ties be broken, the increase in shipping costs from far-away sources implies lower profits for the U.S. agricultural sector and higher prices of groceries for U.S. consumers.
Exports
Import and export data is broken down into two major categories: goods and services.
While both are at risk, U.S. exports of goods have shown a pronounced drop since April 2026, while the trend in the export of services looks to be flattening.
But isn’t the U.S. a net exporter of petroleum?
Yes, but the $26 billion export of petroleum amounts to only 8.5% of total exports, and its share will most likely drop if and when energy prices stabilize.
Imports
Neither the tariffs or the untoward words with our trading partners seem to have had much of an effect on U.S. buying habits.
Imports of goods are reaching levels of the 2025 pre-tariff surge, with the increase in recent months seeming to be a function of importers taking out insurance on the ability of shipping to continue unimpeded.
But what are Americans buying?
Among the five categories of imports—food, industrial supplies, capital goods, automobiles and parts, and consumer goods—only imports of capital goods have grown this year compared with the same time period in previous years.
Imports of tech equipment
Within the capital goods category, telecommunications equipment, semiconductors, electrical apparatus, computer accessories and computers comprise 80% of recent imports.
Like the rest of the economy, tech imports now dominate the landscape and highlight the inconsistency of policy. If you think it’s necessary to promote AI’s role in productivity and economic growth, why impede the flow of goods necessary to create that productivity?
The takeaway
The restriction of trade is hurting exporters and importers, with increased costs for businesses and households.
There is one big exception. Imports of capital goods, which include tech equipment, have continued to grow over the past five years as businesses invest in productivity and as investments in AI accelerate.