The U.S. goods trade deficit narrowed sharply in June to $86.0 billion, the lowest level since September 2023, as imports plunged by $11.5 billion, or 4.2%, signaling waning domestic demand. This unexpected contraction boosts economists' expectations for second-quarter GDP growth, potentially reversing the 0.5% decline seen in Q1.

Imports of consumer goods led the decline, falling 12.4%, while industrial supplies, foods, and motor vehicles also dropped. In contrast, capital goods imports edged up 0.6%. Exports slipped 0.6%, dragged by an 8.1% fall in industrial supplies, though capital goods, food, and consumer goods exports rose.

The trade improvement comes after a Q1 import surge, when firms raced to beat higher tariffs under President Trump. With trade uncertainty easing and inventories adjusting, the second half of 2025 may see more stable trade flows. Retail and wholesale inventories in June showed modest growth, with motor vehicle stocks rising 0.9%.

Economists now see upside risk to their GDP forecasts, with consensus estimates pointing to a 2.4% rebound in Q2 growth.