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The U.S. Trade Deficit Posts Record Narrowing: Is This Just A Sharp Correction or New Trend?  

• The U.S. trade deficit shrank by a record 55.5% in April, driven by a historic 16.3% plunge in imports and a 3% rise in exports.
  
  
• If this shift holds, the narrowing trade gap could give Q2 GDP a meaningful boost — thanks to how net exports factor into economic growth.

What you need to know:  U.S. trade deficit narrowed sharply in April — the biggest drop on record — driven by the steepest collapse in imports ever¹.  

Why it matters: This marked a sharp and sudden halt to the front-loading frenzy by firms racing to import ahead of expected tariffs. The trade gap in goods and services shrank 55.5% from the prior month to $61.6 billion — the smallest since 2023 — fully reversing the Q1 deficit spike. Meanwhile, exports rose 3%. This one-two punch (exports up, imports down) means the narrowing trade deficit will likely give second-quarter GDP a sizable boost — at least on paper, given how it’s calculated.

Now the Deep Dive: Call it mean reversion — aka a sharp correction back toward the average — or call it the start of a new trend. Either way, the U.S. trade deficit just saw a dramatic drop in April.

The key drivers? Well, imports plunged 16.3%, while exports rose 3%.

Alas, less coming in + more going out = the trade balance improves.

And if this continues, Q2 GDP could get a solid lift. Why? Because of how GDP is calculated:

GDP = Consumption (C) + Government Spending (G) + Investment (I) + Net Exports (Exports – Imports)

So - all else equal - when net exports rise (either from fewer imports or more exports), GDP rises too.

• Keep in mind that this is also why Q1 GDP came in weak at -0.2%. The trade gap had exploded (hitting a record high $140.5 billion in March²) as many front-loaded buying goods ahead of rising tariffs.

Now, we’re seeing the reversal as 1. Companies are sitting on the extra inventory they bought already and now need to sell it before buying more and 2. Higher tariffs and a weaker dollar are biting into upcoming imports.

More interesting was that not only were imports broadly lower, but the deficit with China dropped to just $19.7 billion — the smallest since the early COVID lockdowns.

And there are signs this trend may continue.

For example, leading indicators — like the latest ISM Manufacturing Index — show the sharpest drop in import activity since 2009³. That’s no small signal.

So, are U.S. trade deficits finally starting to correct after years of widening?

It’s too soon to say for sure — but as I’ve written before, a structural narrowing of the deficit would ripple across global markets (read here).

Stay tuned. 

Figure 1: Bloomberg, June 2025

The Collapse of First-Time Homeownership: Why the American Dream Is Slipping Away 

• First-time buyers now make up just 24% of home sales — a collapse that signals deep cracks in wealth-building for younger generations.
  
  
• As ownership slips away, homes are transforming into investment assets — not places to live — driving a widening gap in economic opportunity.

What you need to know:  According to Apollo, first-time buyers now make up just 24% of home sales — down from 50% in 2010 — as record prices and near-7% mortgage rates continue to lock out a growing share of would-be homeowners. 

Why it matters: This shrinking share is another clear sign of the American dream slipping further out of reach for younger generations — caught between soaring prices and rising rates. The ripple effect? More buyers are being pushed into the rental market, driving rents higher and fueling housing inflation — a key pressure point the Fed can’t afford to ignore. 

Now the Deep Dive: First-time homebuyers now make up less than a quarter of the market — down from 50% just 14 years ago.

That’s not a dip. That’s a collapse.

But here’s what gets missed. . .

For most Americans, a home isn’t just a shelter — it’s the core of their net worth.

For instance, as we highlighted in last year’s “Dunham Mid Year Outlook: Choppy Waters Ahead!” - the bottom 50% of U.S. households — roughly 65 million families — hold nearly half of their entire net worth in their home.

Keep in mind this isn’t meant to be a treatise on wealth inequality - but a warning about the economic structure. Because when ownership starts slipping away, the system strains — quietly, but deeply.

Meanwhile, housing affordability has completely deteriorated.

• Buying the median home now eats up 46% of median income — the worst since 2008 — forcing households to stretch budgets, cut back elsewhere, or lean on debt just to cover the basics⁴.

Thus, for many first-time buyers, the math simply doesn’t work anymore.

But, if they’re not buying. . . who is?

The answers are more troubling:

• Repeat buyers tapping into current home equity as leverage to buy their second or third homes.
  
  
• All-cash buyers now make up 32% of the market — often investors, retirees, or the wealthy avoiding mortgage rates. And since all cash means, well, all cash - it’s a clear sign of who’s buying (those with an abundance of cash).
  
  
• Institutional players like Blackstone and Invitation Homes are converting single-family homes into rentals (investor purchases made up over 20% of home sales in 2023, per Redfin).
  
  
• Foreign capital snapping up high-end urban properties to park wealth — not live in them.

In short – home ownership continues consolidating. And that has consequences.

• Homes are changing from places people actually live in to investment vehicles.
  
  
• Wealthier buyers are stacking more and more properties – compounding their wealth.
  
  
• Young buyers are getting priced out — crowded out — by equity-rich individuals and institutional giants.

This isn’t just a housing gap. It’s a potential wealth gap, an opportunity gap, and a slow bleed of the “American Dream” — all of which risk deeper economic and political blowback, especially for the younger generations.

Something to monitor. 

Figure 2: Apollo Academy, June 2025

What Beijing Isn’t Telling Us: Inside China’s Vanishing Economic Indicators

•  As Beijing stops publishing hundreds of economic data points - like land sales, unemployment, and consumer confidence - it’s not just hiding weakness, it’s deepening global market uncertainty at a time when trust in China’s trajectory is already fraying. 
  
  
• Markets can price in slowdowns, but not silence — and as China’s leadership tightens control over economic messaging, the vanishing data raises red flags that the underlying problems may be far worse than officially reported.

What you need to know: Beijing has stopped releasing hundreds of key data points, making it harder to gauge the true state of the world’s second-largest economy. As the gap widens between official figures and independent data, it’s raising fresh doubts about what’s being left out — and what Beijing may be trying to hide. 

Why it matters: Markets run on trust — and trust runs on data. Thus, when the world’s second-largest economy starts going dark, it raises more than eyebrows. Investors get skittish. Capital pulls back. And uncertainty creeps in. If Beijing is cherry-picking what to show and what to bury, it likely is the real story — since whether it’s slowing growth, rising debt, or internal cracks — is worse than they’re letting on. Bottom line: less transparency doesn’t reduce risk. It multiplies it. 

Now the Deep Dive: I found this WSJ piece fascinating⁵ as it highlights a growing issue in China: the curious case of the disappearing data.

For years, when things were looking good, Chinese economic data was easy to find. But lately, it’s been vanishing — and not coincidentally (it’s right as the economy started sputtering).

And we’re not talking marginal data points here. We’re talking big ones – things like:

• Land sales (which, as I’ve written before, are the top revenue source for local governments)
• Unemployment metrics
• Demographic stats
• Business and consumer confidence surveys

Meanwhile, Beijing has offered no explanation. And the silence is deafening.

But let’s be honest — when governments stop publishing data, it’s usually because they’re trying to hide something.

And who could blame them? China’s facing a property crisis, weak consumption, a trade war, ballooning debt, and ugly demographic trends.

So why is this happening? Well, it’s likely that Beijing knows bad numbers hurt the outlook and the government’s credibility. And if you’re a one-party regime that stakes its legitimacy on economic strength, that’s a dangerous game.

But here’s where we need some perspective.

We shouldn’t rush to declare this China’s Berlin Wall moment. Nor should we buy into the glossy narrative that this is just a temporary slowdown on the road to tech supremacy.

The truth is probably somewhere in between.

But what we do know is that transparency is fading. And that’s troubling. Because even when the numbers were suspect, at least they existed.

• Back in 2007, while still Party Secretary of Liaoning, Li Keqiang reportedly told a U.S. diplomat that China’s GDP numbers were “man-made” and “for reference only.” (this came to light in a leaked diplomatic cable later published courtesy of WikiLeaks in 2010)⁶.

So if the numbers were sketchy before, now they’re just… gone.

Worse still is that questioning it has become dangerous.

• Remember back in December 2024, when Gao Shanwen — chief economist at SDIC Securities — publicly suggested that China’s real GDP growth averaged closer to 2% over the last few years, not the official 5%? Well, that statement reportedly angered President Xi and triggered an investigation into Gao. He’s since been barred from public commentary (essentially muzzled) — though he still holds his job⁷.

Beijing can’t risk losing the public's trust either, as so will go their political power.

But here’s the broader point: markets can price in bad news. What they can’t price in is uncertainty. And no data creates exactly that.

So, as China’s real estate dominoes keep falling, and trade tensions heat up, Beijing’s decision to dim the lights only makes the problem worse.

This is just something to keep in mind when assessing the world’s second-largest economy — because risk doesn’t vanish when the data does.

It just hides in plain sight. 

 Figure 3: Wall Street Journal, May 2025 

Anyway, who knows what will happen?

This is just some food for thought as we watch how these trends develop.

As always, we’ll be keeping a close eye on things. Enjoy the rest of your weekend.

Sources:

1. U.S. International Trade in Goods and Services, April 2025 | U.S. Bureau of Economic Analysis (BEA)
2. U.S. Trade Deficit Widens Sharply in March 2025 to Record Levels - Washington Trade & Tariff Letter
3. Manufacturing activity contracted in May as imports hit lowest level since 2009
4. Home Ownership Affordability Monitor - Federal Reserve Bank of Atlant
5. Share of Cash Buyers Surges to Decade High
6. First-Time Home Buyers Making Up a Smaller and Smaller Share of the Market - Apollo Academy
7. How Bad Is China’s Economy? The Data Needed to Answer Is Vanishing - WSJ
8. China's GDP is "man-made," unreliable: top leader | Reuters
9. Exclusive | Xi Jinping Muzzles Chinese Economist Gao Shanwen, Who Dared to Doubt GDP Numbers - WSJ 

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