The U.S. trade deficit widened by the most in 16 months as a boom in artificial intelligence drove a surge in imports of semiconductors and computers. Analysts say expanding AI infrastructure investment is pushing imports higher, running counter to the Trump administration's plan to shrink the trade gap through tariffs and a revival of domestic manufacturing.
The Commerce Department said the goods and services trade deficit came to $88.6 billion in July, up more than 24% from the previous month, according to The New York Times on the 3rd.
Total imports rose 2.8% from June to $399.3 billion in July, driven largely by a sharp increase in purchases of computers, peripherals and semiconductors used to build AI data centers. Exports fell 2.1% to $310.7 billion as shipments of gold and crude oil declined.
July's deficit was the largest since President Donald Trump began imposing steep tariffs in April of last year. Trump has pursued a policy of levying high duties on foreign goods to curb imports and rebuild domestic manufacturing.
But as U.S. companies rapidly step up construction of AI data centers, they are buying large volumes of expensive semiconductors and computers from abroad, a trend at odds with that policy. U.S. imports of capital goods, which include computers, hit a record high in July, and the trade deficit with Taiwan reached an all-time high of $20.7 billion.
U.S. imports of Taiwanese goods totaled $143 billion in the first half of this year, surpassing the $140 billion in imports from China for the first time. The U.S. trade deficit with South Korea, Mexico, Vietnam and Thailand also widened.
Concerned that data center investment could stall, the Trump administration has exempted key electronics such as semiconductors and smartphones from tariffs for more than a year. The government plans to introduce chip tariffs soon, though exemptions are expected for companies building production facilities in the United States.
Eswar Prasad, a professor at Cornell University, said it is difficult to read the widening deficit as a sign of a weakening U.S. economy. He said it instead shows robust investment demand within the United States, particularly in AI and advanced technology.
