WASHINGTON, D.C.: Record imports pushed the U.S. trade deficit to US$105.6 billion in August, the largest in 17 months, as strong domestic demand kept businesses reliant on goods produced overseas.

The trade shortfall increased 13.7 percent, the Commerce Department's Bureau of Economic Analysis and Census Bureau said. Economists polled by Reuters had forecast a $102.0 billion deficit.

The deterioration came despite President Donald Trump's aggressive tariffs on imports, which he has argued are meant to shrink the trade gap. The nation posted record goods trade deficits with at least three countries, including Mexico.

"The administration's trade policies have largely been a failure; trade tariffs have done nothing to reduce America's reliance on the import of foreign-produced goods," said Christopher Rupkey, chief economist at FWDBONDS. "The cost of American labor is simply too high to produce goods here cheap enough for consumers to even think about purchasing. Even if US manufacturers were willing, the factories could not be built here fast enough to produce the goods that consumers depend on."

The trade deficit stood at $79.8 billion when Trump was elected for a second term in November 2024. Data released last week flagged August's deterioration, showing an import-driven surge in the goods trade deficit.

Domestic demand increased at its fastest pace in more than 3-1/2 years in the second quarter, reflecting robust consumer spending and business spending on equipment, mostly related to AI. The trend appears to have spilled over into the third quarter, with strong consumer spending in August as well as orders and shipments of nondefense capital goods, excluding aircraft.

Imports increased 4.3 percent to an all-time high of $420.8 billion in August. Goods imports jumped 5.3 percent to $342.2 billion, boosted by a $9.1 billion increase in industrial supplies and materials, which include petroleum.

Crude oil imports rose $3.3 billion, while nonmonetary gold increased $3.1 billion. Capital goods imports soared $6.2 billion to a record $146.4 billion, driven by semiconductors and other industrial machinery. Imports of computer accessories, however, decreased by $1.6 billion.

Exports rose 1.4 percent to $315.2 billion. Goods exports increased 2.2 percent to $205.7 billion, reflecting a $6.3 billion rise in industrial supplies and materials, mostly nonmonetary gold, crude oil and fuel oil.

Capital goods exports rose $1.3 billion, lifted by semiconductors and computers, while civilian aircraft exports fell $1.0 billion. Consumer goods exports dropped $2.2 billion, pulled down by a $2.4 billion decline in pharmaceutical preparations.

The goods trade deficit increased 10.3 percent to $136.6 billion in August. When adjusted for inflation, it widened $8.7 billion, or 8.2 percent, to $114.7 billion.

Trade has subtracted from GDP for three straight quarters, and economists estimate it could cut GDP by as much as 2.5 percentage points in the third quarter. Growth estimates for the July-September quarter are mostly above a 3.0 percent annualized rate, with consumer spending expected to offset the drag from imports. The economy grew at a 2.2 percent pace in the second quarter.

The United States recorded goods trade deficits with Mexico, Vietnam and Malaysia, while maintaining deficits with Taiwan, China, the European Union, South Korea, Canada and India, among other trading partners. It posted a record goods trade surplus with Belgium.