US trade deficit widens sharply in May as capital goods imports hit record high

The U.S. trade deficit widened sharply in May, jumping 42.2% to $77.6 billion, as an AI investment boom drove imports of capital goods to a record high of $128.0 billion. Exports fell 3.2% to $317.7 billion, though petroleum shipments hit a record. The widening gap suggests trade remained a drag on GDP in the second quarter.

WASHINGTON, July 7 Reuters - The U.S. trade deficit widened sharply in May as an artificial intelligence investment boom helped to drive imports of capital goods to a record high, suggesting that trade remained a drag on gross domestic product in the second quarter. The trade gap jumped 42.2% to $77.6 billion, the Commerce Department's Bureau of Economic Analysis and Census Bureau said on Tuesday. Economists polled by Reuters had forecast the deficit at $78.5 billion. Imports increased 3.3% to $395.3 billion, with imports of capital goods soaring to a record high $128.0 billion. Businesses are spending heavily on AI, whose buildup is heavily reliant on imports. Exports dropped 3.2% to $317.7 billion, though shipments of petroleum were the highest on record amid the Middle East conflict. The U.S. is a net oil exporter. Trade has subtracted from GDP for two straight quarters. The Atlanta Federal Reserve's model is currently forecasting GDP increasing at a 1.2% annualized rate in the second quarter. The economy grew at a 2.1% pace in the January-March quarter. Reporting By Lucia Mutikani; Editing by Andrea Ricci