The Big Idea

The anatomy of an import plunge

Stephen Stanley | June 6, 2025

This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors. This material does not constitute research.

The swings in merchandise imports in March and April were essentially unprecedented, as firms did their best to rush inputs and finished goods into the US before President Trump’s Liberation Day tariffs were implemented. Merchandise imports surged in March and then sank in April in a broad-based manner. A closer look at the details by product type and by source offers some hints of what may transpire over the next few months.

Merchandise imports

Just to level set, merchandise imports on a Census basis averaged $272 billion a month in 2024. As soon as President Trump won the election, however, imports began to swell, rising to $291 billion in December, $328 billion in January, $326 billion in February, and a record $345 billion in March. Then imports for April, which were released on Thursday, receded to $276 billion, just a few billion dollars higher than the year-ago reading of $269 billion.

Breakdown by product

The $69 billion plunge in merchandise imports in April was broad-based, with all six major categories contributing. However, there were several line items that accounted for the bulk of the drop (Exhibit 1).

Exhibit 1: Largest month-to-month change in merchandise imports in April

Source: Census Bureau.

The largest contributor to the April fall in imports was pharmaceuticals. A year ago, imports of pharmaceuticals averaged a little over $19 billion a month from January through April. By comparison, drug imports were already running high early this year, at $28.3 billion in January and $29.5 billion in February. Then, they spiked to just over $50 billion in March. In April, they fell back to $24.2 billion, still well above the monthly pace in 2024. If the April level of $24 billion is close to a normal baseline, then drug companies brought in something like $35 billion in extra product over the first three months of 2025 to avoid tariffs. This would suggest that we could see further declines in this category going forward. It is also worth noting that the administration is currently conducting a Section 232 investigation for this industry and may impose product-specific tariffs, as they have already done for steel and autos.

The next category of imports to post a sharp drop in April was the precious metals complex, encompassing two line-items, “finished metal shapes” and “other precious metals.” The story here is that investors, mainly in gold, were afraid that their physical gold stocks could be subject to tariffs if held overseas upon return to the US As a result, beginning in December, imports spiked, peaking in January and receding but remaining elevated in February and March. On April 2, the detailed explanation of the Liberation Day tariffs offered an exception for precious metals. Thus, it is not surprising that imports sank, essentially back to the prevailing early-2024 pace, in April. In fact, exports for this category jumped in April, as investors presumably began to send their physical gold stocks back overseas. Thus, the import figures have likely returned to a reasonable resting place, but exports may remain elevated for the next few months, flattering the monthly trade balance figures.

Another key point that bears repeating is that, from a GDP perspective, none of this matters. The BEA has always excluded gold flows from its net export calculations, making an adjustment to the monthly trade figures. They have correctly concluded that the preponderance of gold flows reflects investment decisions rather than economic activity.

The third major area for which merchandise imports sank in April was motor vehicles. In this case, the Administration began its tariff offensive much earlier than for most other products, imposing (and then waiving for the most part) 25% tariffs on Canada and Mexico that roiled the auto industry well before April 2. As a result, there was no sharp jump in auto imports in March. In fact, the level of vehicle imports in the first three months of this year was modestly lower than in the corresponding year-ago period. Even so, motor vehicle imports dropped by over $8 billion in April and seem likely to remain unusually low in the next few months.

The fourth and final product to highlight is cell phones. Undoubtedly, Apple and other cell phone companies sought to stock up on phones ahead of the imposition of tariffs. Imports of cell phones in the first three months of this year jumped by about $7.5 billion, or 28%, from the corresponding year-ago period. In April, cell phone imports sank by $3.5 billion to a pace that was marginally lower than April 2024. Given that cell phone imports year-to-date through April are up by more than 20% year-over-year, I would not be surprised to see further weakness in the months ahead.

These four products accounted for over 80% of the April merchandise import drop. Other areas were soft too, as the rest of the categories saw a drop of over $10 billion from March.

Breakdown by country

The breakdown of imports by country offers confirmation for some of the narratives laid out above and also provides additional insight on the path ahead (Exhibit 2).

Exhibit 2: Largest month-to-month change in merchandise imports in April

Source: Census Bureau.

Several of these countries closely correspond with the product narratives above. Ireland is the main exporter of pharmaceuticals to the US Switzerland is the primary overseas repository for gold (I suspect that a $2.2 billion drop in imports from the UK may also at least partially reflect the slowing movement of gold from London to New York).

The next three countries to a significant degree but not entirely correspond to the motor vehicle narrative. Imports of motor vehicles and parts from Canada, Mexico, and Germany dropped by over $5 billion from March to April. South Korea also registered a sizable decline in vehicle imports in April. Note that Japan did not make the list. In fact, merchandise imports from Japan were up slightly overall in April from March and down only slightly for vehicles. This likely reflects the fact that Japanese auto companies produce a large percentage of the vehicles sold in the US market domestically now, a pattern that President Trump hopes to see replicated by others going forward.

The dog that didn’t bark in the April import numbers was China. There were a large number of press stories in April about the halting of freighters from China to the West Coast of the US However, imports from China in April only fell by about $4 billion, or less than 14%. That is not an insignificant monthly fall, but it undoubtedly does not fully capture the interruption of trade flows from China to the US after the Administration imposed 145% tariffs on April 9. The muted swings also reveal that there was no massive acceleration on imports from China in the run-up to Liberation Day. In fact, merchandise imports from China in the first three months of 2025 were only about $5 billion, or about 5%, higher than a year ago. In any case, since it typically takes a month or two for freighters to make the voyage from China to the U.S., I would expect that the interruption of shipments from China will mainly show up in the May and June trade figures.

Looking ahead

The main takeaway from this detailed analysis of the April trade figures is that the story is far from complete. In the first three months of the year, goods imports increased by $210 billion from the corresponding year-ago period, a rise of well over 20%. Most of that advance reflects frontloading in advance of tariffs. The fact that imports merely receded to roughly the prevailing 2024 trend in April indicates that a further downward impetus is likely in the next few months.

The detailed breakdown supports that story. In particular, imports from China are likely to drop significantly further in May and June. In addition, for other products, like pharmaceuticals and cell phones, where firms have stocked up, imports should also fall further in the months ahead.

From a GDP perspective, which excludes the gold flows, I have currently penciled in a full reversal of the massive widening in the real trade deficit recorded in the first quarter. That is the primary reason that I look for real GDP growth to accelerate sharply in the second quarter, perhaps to 3.5% or higher. However, financial market participants would do well to ignore the erratic gyrations in the trade and inventories components of GDP and focus on the core sources of final demand: consumption, investment, and government outlays. After posting a solid 2.0% annualized increase in the first quarter, real final domestic demand may slow to a crawl in the second and third quarters, perhaps rising by around 0.5% annualized in each quarter.

Stephen Stanley
stephen.stanley@santander.us
1 (203) 428-2556

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