Trump tariffs are effective! The US trade deficit hits a five-year low, and gold exports surge by 6.1 billion

U.S. September Trade Deficit Falls 11% Month-over-Month to $52.8 Billion, Lowest Since June 2020. Exports Increase 3% to $289.3 Billion, Mainly Driven by Non-Monetary Gold Exports, Which Rise by $6.1 Billion. President Trump Has Repeatedly Vowed to Reduce the U.S. Trade Deficit, and a White House Statement Says This Further Demonstrates That President Trump’s “America First” Trade Agenda Is Working.

The Truth Behind the Data Behind the Five-Year Low of $52.8 Billion

The U.S. trade deficit narrowed more than expected in September, with the gap between goods exports and imports decreasing by 11% month-over-month to $52.8 billion. This brings the deficit to its lowest level since June 2020 and below the $63.3 billion forecast from economists surveyed by Reuters. The better-than-expected improvement immediately sparked market expectations that net exports in Q3 would boost economic growth.

Exports grew 3% to $289.3 billion compared to August, while imports rose by 0.6%. The faster growth in exports relative to imports is the direct reason for the narrowing trade deficit. However, the quality of this improvement has raised doubts among economists. Paul Ashworth, Chief North America Economist at Capital Economics, pointed out that of the $8.7 billion increase in exports in September, most came from non-monetary gold shipments, which rose by $6.1 billion, “which does not count toward GDP.”

Why is gold export not included in GDP? Because non-monetary gold is considered a financial asset rather than a commodity, and its export reflects capital flows rather than actual economic production. When the U.S. exports gold, it is usually because foreign investors are purchasing U.S. stored gold; these transactions do not create new economic value, merely a transfer of asset ownership. Therefore, although gold exports are counted in trade statistics, they are excluded when calculating GDP.

Oliver Allen, Senior U.S. Economist at Pantheon Macroeconomics, said he expects the sharp jump in gold bar exports to “almost certainly” fall back in Q4, so the decline in the trade deficit in September “does not say much.” This judgment is based on the volatility of gold exports, as historical data shows that gold exports tend to fluctuate significantly rather than follow a stable trend, with large monthly surges usually reverting to normal levels afterward.

Three Possible Reasons for the $6.1 Billion Surge in Gold Exports

The increase of $6.1 billion in non-monetary gold exports in September is extremely rare; such a large monthly increase is uncommon in recent data. Economists and market analysts have proposed several possible explanations, but the exact cause remains to be further disclosed by official sources.

Drivers Behind the Gold Export Surge

Rising Global Safe-Haven Demand: Geopolitical tensions worldwide and uncertainties around the U.S. elections in September drove foreign investors to purchase U.S.-stored gold.

Dollar Strength and Arbitrage Trading: If the dollar appreciates, making gold relatively cheaper, foreign buyers may focus on purchasing U.S. gold and bringing it back to their countries.

Institutional Rebalancing Operations: Large central banks or sovereign wealth funds might be adjusting their asset allocations, increasing holdings of physical gold.

Paul Ashworth of Capital Economics emphasized that the $6.1 billion gold export accounts for most of the $8.7 billion increase in overall exports. Excluding gold, export growth would be only around $2.6 billion, far less impressive than the surface data suggests. This structural analysis reveals the fragility of the trade data improvement; if gold exports fall back as expected in Q4, the trade deficit could widen again.

However, Allen also stated that he now expects the net contribution of exports to economic growth in the quarter to be higher than previously forecast, “which slightly upwardly revises our GDP growth estimate of 3.5%.” Even if gold exports are excluded from GDP, the narrowing trade deficit itself still contributes positively to GDP because it reduces the “net export drag” component in economic growth.

The U.S. Bureau of Economic Analysis (BEA) will release the preliminary Q3 GDP estimate on December 23, which will incorporate the above trade data. After the data release, Atlanta Fed estimates that, over the three months ending September 30, U.S. real GDP growth will reach 3.6%, an upward revision of 0.1 percentage points from their previous forecast on December 5. Economists surveyed by Reuters before the trade data release expect the period’s economic growth to be around 3%.

Doubts About Trump Policies: White House Celebrations Questioned by Economists

President Trump has repeatedly vowed to narrow the U.S. trade deficit and has used tariffs as one of the tools to achieve this goal. A White House statement said that the data released on Thursday “further demonstrate that President Trump’s ‘America First’ trade agenda is working.” However, this celebratory claim has been met with skepticism by economists, who believe that the improvement in the trade deficit is mainly due to the accidental factor of gold exports, rather than the structural effects of Trump’s tariff policies.

Economists acknowledge that net trade may have boosted GDP in Q3 but warn against overemphasizing its importance because of the significant impact of gold exports. The deeper implication of these warnings is that attributing the trade deficit improvement solely to Trump’s policies could lead to misjudging policy effects and making incorrect subsequent decisions. If the Trump administration further intensifies tariffs based on this data, it could face the embarrassment of the trade deficit widening again once gold exports decline.

U.S. Treasury Secretary Scott Bessent expressed optimism about the economic outlook. He told CBS on Sunday: “Despite the ‘Shumel shutdown,’ we will still end the year with 3% real GDP growth.” He mentioned that the 43-day government shutdown was largely blamed on Democratic Senate Minority Leader Chuck Schumer. This politicized statement indicates that trade data has become a new battleground for both parties competing for credit on economic policy.

From a longer-term perspective, monthly trade data fluctuations do not reveal structural trends. The root causes of the U.S. trade deficit lie in insufficient domestic savings, excess consumption over production, and capital inflows driven by the dollar’s status as the global reserve currency. These structural factors cannot be changed quickly through tariff policies. To sustainably reduce the trade deficit, the Trump government would need deeper economic structural reforms rather than merely relying on trade barriers.

The surge in gold exports also reflects global economic uncertainty. When investors lose confidence in fiat currencies, physical gold becomes the preferred safe haven asset. As one of the world’s largest gold storage countries, foreign investors’ purchases and exports of gold partly reflect concerns about the long-term prospects of the dollar. This pattern of capital flows conflicts with the narrative of the Trump administration’s “America First” policy being successful, revealing inherent contradictions in the logic.