US Current-Account Deficit Narrows Significantly

The Bureau of Economic Analysis (BEA) reported today that the US current-account deficit narrowed by nearly 10% in the third quarter of 2025, dropping to $226.4 billion. This decline reflects a shift in the balance of trade, with the deficit decreasing as a percentage of current-dollar gross domestic product (GDP) to 2.9%, down from 3.3% in the previous quarter. The narrowing gap is attributed to a combination of increased exports and a decrease in imports, signaling a potential stabilization in US international trade dynamics despite the volatile global economic environment.

While the shrinking deficit is a positive indicator for the broader economy, it comes amidst mixed signals in other sectors. Recent data from the Bureau of Labor Statistics shows that while inflation remains a concern with slight increases in consumer prices, the labor market is cooling, with payroll employment growth slowing. The trade data provides a glimmer of resilience, suggesting that American goods and services are maintaining competitiveness abroad. However, economists are watching closely to see how new tariffs and shifting trade policies in 2026 will impact this trend in the coming quarters.