Kiplinger Trade Outlook: Deficit Rises to Normal Levels After Record Narrowing

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The U.S. trade deficit underwent a dramatic reversal in November, widening to $56.8 billion — a sharp increase from the decade-low $29.2 billion recorded just one month earlier. This shift ended a period of significant narrowing and moved the trade balance back toward historical norms, following one-off distortions in the final quarter of 2025. Unlike the previous month, when the gap narrowed due to plunging imports, November's expansion was driven by a substantial 5.0% rise in imports that outweighed a 3.6% decline in exports. The goods deficit widened by $27.9 billion to reach $86.9 billion, while the services surplus remained relatively stable, edging up slightly to $30.1 billion. However, the headline widening in November may reflect a normalization of trade flows rather than a fundamental shift in economic demand.

Asset Reallocation and Irregular Factors

A significant portion of November’s export decline was driven by a big drop in outbound shipments of nonmonetary gold, which fell $4.2 billion during the month. These shipments are typically excluded from GDP calculations by the Bureau of Economic Analysis because they often reflect speculative financial asset reallocation — such as investors seeking shelter from geopolitical risk — rather than final spending on produced goods. When making similar adjustments to trade data, analysts at Wells Fargo estimate that the underlying trade deficit actually looks nearly $12 billion worse than the headline figure suggests. Simultaneously, the pharmaceutical preparations category saw a sharp $6.7 billion surge in imports, returning to historical averages after tariff fears had driven erratic swings in previous months.

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High-Tech Demand vs. Broader Import Weakness

Total imports surged by $16.8 billion in November, led by a $9.2 billion increase in consumer goods and a $7.4 billion rise in capital goods. Specifically, imports of computers increased by $6.6 billion and semiconductors rose by $2.0 billion, signaling continued strength in high-tech-related demand, despite broader trade policy uncertainty. While overall goods imports have risen year-over-year, much of that strength is in goods in greater demand by the high-tech sector. Excluding these categories, underlying import growth has actually trended negative through late 2025. This suggests firms may be running leaner inventories outside of essential tech components as they navigate the high costs of duties.

Tariff Gaps and USMCA Reclassification

The U.S. trade balance continues to be reshaped by shifting global alliances. In November, the effective tariff rate remained at approximately 11.0%, which stayed below many initial calculations due to trade diversion and the fact that the share of goods subject to tariffs in overall imports remained below 50%. Trade with USMCA partners has seen dramatic reclassification, with over 85% of imports from Mexico and Canada now entering under trade-agreement status. This potentially reflects increased certification or reclassification to avoid higher duties. Looking ahead, net trade is expected to be a drag on U.S. GDP growth in the fourth quarter.

Source: Bureau of Economic Analysis

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