US trade deficit widens 42% in May as AI-driven imports hit record high

The US trade deficit widened sharply in May as surging imports of capital goods, fuelled by the artificial intelligence (AI) investment boom, outpaced exports, keeping trade a drag on economic growth in the second quarter.

According to data released by the US Commerce Department's Bureau of Economic Analysis and the Census Bureau, the trade deficit jumped 42.2 per cent to $77.6 billion in May from the previous month. The figure was slightly better than economists' forecast of $78.5 billion in a Reuters poll.

Total imports rose 3.3 per cent to $395.3 billion, with capital goods imports hitting a record $128 billion, reflecting robust spending by businesses on AI infrastructure and technology. The rapid expansion of AI data centres and computing capacity continues to drive demand for imported equipment.

Meanwhile, exports fell 3.2 per cent to $317.7 billion. However, petroleum exports touched a record high amid ongoing tensions in the Middle East, reinforcing the US position as a net oil exporter.

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The latest trade data suggests that external trade is likely to remain a headwind for the US economy. Trade has already subtracted from GDP growth for two consecutive quarters.

The Atlanta Federal Reserve's GDP Now the model currently estimates the US economy will expand at an annualised pace of 1.2 per cent in the second quarter, slowing from the 2.1 per cent growth recorded in the January-March period.

The widening trade gap underscores how the AI investment cycle is reshaping global trade flows, with rising imports of high-end technology equipment outweighing gains from exports.