U.S. Trade Gap Shrinks to Smallest in Over a Year, BMO Says

07:19 AM EST, 11/25/2025 (MT Newswires) -- The United States trade imbalance widened sharply at the start of the year but narrowed to its smallest shortfall in more than a year in August, according to Bank of Montreal (BMO).

Among major trading partners, the three largest bilateral U.S. deficits are with China, the European Union and Mexico, noted the bank.

China's share of the U.S. deficit has plunged from almost 50% in 2018 -- when the trade war first began -- to about 19% now. Meantime, Vietnam's share of the gap has rocketed to 12%.

Presidents Donald Trump and China's President Xi Jinping spoke on Monday, and there is a one-year standstill deal, but a more detailed agreement may never happen, stated BMO.

The EU's share of the U.S. trade gap has been creeping higher over time, but is generally stable at just under 19%. Technically, Mexico and Canada combined have roughly a like-sized imbalance with the U.S., together accounting for 18.6% over the past year.

However, that's mostly due to trade with Mexico. Canada's share of the U.S. deficit has narrowed to just 4.3% in the past 12 months, comparable with India or Thailand, added the bank.

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