America’s Trade Deficit Just Had Its Best Quarter in 33 Years

quote:

---

While the annual 2025 deficit was essentially flat at $901.5 billion (down just $2.1 billion from 2024), this masks a seismic shift in the second half of the year—and particularly in the fourth quarter.

November 2025 posted the largest rolling three-month trade deficit decline in recorded history, with the three-month average falling $35.3 billion year-over-year, a 45 percent drop. This surpasses even the peak months of the 2009 Great Recession.

---

quote:

---

The country-level data tells an important structural story the annual aggregates conceal. Last year was the Year of the Wooden Snake for China, supposedly a year of transformation and wisdom revealed over time. In the final quarter of the year, the China deficit fell $93.4 billion to $202.1 billion—the smallest in more than two decades. That’s a 32 percent decline year-over-year, achieved not through recession but through deliberate policy rebalancing.

---

quote:

---

Trade flows shifted to Taiwan (deficit up $73 billion), Vietnam (up $54.7 billion), and Mexico (up to a record $196.9 billion). Some of this represents supply chain rerouting rather than true rebalancing. But the China numbers show tariffs can reshape bilateral trade patterns dramatically.

---