U.S. Current Account Deficit Narrows Sharply, Smallest Gap Since 2023

New data shows the U.S. current-account deficit — a key measure of trade and international financial flows — has narrowed significantly, reaching its smallest gap relative to GDP since the third quarter of 2023. This improvement reflects a combination of reduced goods trade shortfalls and stronger export performance, signaling a healthier external balance amid global economic shifts.

Key Highlights:

Deficit Shrinks: The current-account deficit narrowed sharply in the second quarter of 2025 — falling by about 42.9% to $251.3 billion from a record high earlier in the year, driven mainly by a shrinking goods trade imbalance.

Goods Trade Improves: Imports dipped as firms adjusted to tariff changes and reduced front-loaded buying, while exports remained resilient, helping tighten the gap.

Share of GDP: As a share of GDP, the deficit fell to levels not seen since Q3 2023, underlining a meaningful short-term shift in the U.S. balance of payments.

Why This Matters:

A smaller current-account deficit can reflect improved competitiveness and demand for U.S. goods and services abroad, as well as reduced reliance on foreign capital inflows. For markets and policymakers, this trend offers a brighter picture of U.S. external finances just as inflation, trade policy and consumer demand continue shaping the broader economic outlook.

In short: The U.S. is posting its smallest current-account deficit since Q3 2023, driven by trade improvements and a more balanced external position — a potential positive signal for the economy ahead.