The Latest on the US Trade Deficit as We Head to the US Mid-term Elections

With just a few weeks until until the US midterm elections, Donald Trump's tariff policies face an interesting statistical test: America's trade deficit has widened sharply, but its cumulative deficit for 2026 remains substantially below last year's.

The latest Bureau of Economic Analysis figures, released on 6 October, show that the US trade deficit increased 13.7% to $105.6 billion in August, its highest level since March 2025.

Imports jumped 4.3% to a record $420.8 billion, while exports increased just 1.4% to $315.2 billion.

The underlying figures are revealing. America recorded a $136.6 billion deficit in goods, partly offset by a $31 billion surplus in services.

Imports of capital goods reached a record $146.4 billion, including increased purchases of semiconductors and industrial machinery. The AI investment boom is helping drive demand for imported equipment.

Where is the deficit coming from?

Mexico recorded America's largest bilateral goods deficit in August, at $27.7 billion, followed by Vietnam ($24.0 billion), Taiwan ($18.3 billion) and China ($16.4 billion).

This raises questions about whether tariffs are reducing America's import dependence or redirecting trade towards alternative suppliers.

Are Trump's tariffs working?

The year-to-date figures tell a different story.

Through August, America's cumulative trade deficit was $138.2 billion, or 19.9%, smaller than over the equivalent period in 2025. Exports increased 11.8%, compared with 4.4% growth in imports.

However, unusually heavy imports ahead of tariff increases in early 2025 complicate the comparison.

Trade deficits also reflect domestic spending, investment and saving, not simply trade policy.

The next trade figures are due on 4 November — one day after the midterms.

The political question is whether voters believe Trump's tariffs are strengthening American industry sufficiently to justify their economic costs.