US trade deficit hits highest since March 2025, surges 24.4% to $88.6 billion in July as AI boom drives imports

The U.S. trade deficit surged to its highest level in over two years in July, expanding by 24.4% to reach $88.6 billion. This increase was primarily driven by a boom in artificial intelligence infrastructure, which led to a sharp rise in imports. According to government data released on September 3, total exports declined by 2.1% to $310.7 billion, mainly due to a fall in shipments of crude oil and gold.

Meanwhile, total imports rose by 2.8% to $399.3 billion, with the surge largely attributed to strong demand for computers, computer accessories, and semiconductors, crucial components for the ongoing domestic AI tech build-out. Notably, the trade deficit with Taiwan, a key hub for semiconductor manufacturing, hit an all-time high of $20.7 billion for the month, along with records being set with trade gaps in Mexico, Vietnam, Thailand, South Korea, and Malaysia.

The trade deficit with Canada, however, narrowed despite ongoing trade tensions that have seen the U.S. impose 50 percent duties on billions of dollars in Canadian goods, leading to potential retaliatory measures from Ottawa. The volatile trade landscape underscores the ongoing efforts of the Trump administration to reduce trade gaps through a series of tariffs, with Commerce Secretary Howard Lutnick signaling further measures may be implemented, potentially targeting semiconductors.

Geopolitical instability, particularly the conflict in the Middle East, has also added strain to trade flows, as Iran has largely blocked the Strait of Hormuz, a crucial maritime route for global energy and fertilizer shipments.