US trade gap in July hits biggest in over a year on AI buildout

The US trade deficit in July expanded to its highest level since March 2025, with imports surging due to the rapid growth of the AI technology sector, according to government data released Thursday. The nation's trade gap reached a whopping US$88.6 billion, a 24.4% increase from the previous month. This surge was driven by a decline in exports of crude oil and gold, while imports of tech products surged.

Meanwhile, US exports declined by 2.1% to US$310.7 billion. The trade deficit with Taiwan, a major producer of chips, hit a record US$20.7 billion for the month, while the US deficits with Mexico, Thailand, South Korea, and Malaysia also reached record highs. The trade gap with Taiwan was particularly notable, reflecting the country's crucial role in the global chip manufacturing industry.

Despite Trump's tariffs affecting many trading partners, American officials have been cautious not to impose duties on critical products such as chips, smartphones, and other electronic devices. However, the administration is reportedly considering new tariffs on semiconductors, which could further impact trade relations. The US trade dispute with Canada is also causing concerns, as the two nations have been engaged in a trade war, with Washington imposing a 50% duty on billions of dollars worth of Canadian goods.

Meanwhile, geopolitical tensions, including the ongoing Middle East conflict, have disrupted global supply chains, further complicating trade dynamics.